Exhibit 10.41


EXECUTION COPY


PURCHASE AND SALE AGREEMENT


BY AND AMONG


ANADARKO PETROLEUM CORPORATION,


ANADARKO E&P COMPANY LP,


HOWELL PETROLEUM CORPORATION AND


KERR-MCGEE OIL & GAS ONSHORE LP


AS SELLER


AND


EXCO RESOURCES, INC.


AS PURCHASER


Executed on February 1, 2007


 













 


TABLE OF
CONTENTS


	
  

  	
   

  	
  PAGE

  
	
  ARTICLE 1 PURCHASE AND SALE

  	
   

  	
  1

  
	
   

  	
   

  	
   

  
	
  Section 1.1      Purchase and Sale.

  	
   

  	
  1

  
	
  Section 1.2      Assets.

  	
   

  	
  1

  
	
  Section 1.3      Excluded Assets.

  	
   

  	
  3

  
	
  Section 1.4      Effective Time; Proration of Costs
  and Revenues.

  	
   

  	
  4

  
	
  Section 1.5      Delivery and Maintenance of Records.

  	
   

  	
  5

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2 PURCHASE PRICE

  	
   

  	
  6

  
	
   

  	
   

  	
   

  
	
  Section 2.1      Purchase
  Price.

  	
   

  	
  6

  
	
  Section 2.2      Adjustments
  to Purchase Price.

  	
   

  	
  6

  
	
  Section 2.3      Allocation
  of Purchase Price for Tax Purposes

  	
   

  	
  7

  
	
  Section 2.4      Deposit

  	
   

  	
  8

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3 TITLE MATTERS

  	
   

  	
  8

  
	
   

  	
   

  	
   

  
	
  Section 3.1      Seller’s Title.

  	
   

  	
  8

  
	
  Section 3.2      Definition of Defensible Title.

  	
   

  	
  8

  
	
  Section 3.3      Definition of Permitted
  Encumbrances.

  	
   

  	
  10

  
	
  Section 3.4      Notice of Title Defect
  Adjustments.

  	
   

  	
  11

  
	
  Section 3.5      Casualty or Condemnation Loss.

  	
   

  	
  14

  
	
  Section 3.6      Limitations on Applicability.

  	
   

  	
  15

  
	
  Section 3.7      Government Approvals Respecting
  Assets.

  	
   

  	
  15

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4 ENVIRONMENTAL MATTERS

  	
   

  	
  16

  
	
   

  	
   

  	
   

  
	
  Section 4.1      Assessment.

  	
   

  	
  16

  
	
  Section 4.2      NORM, Wastes and Other
  Substances.

  	
   

  	
  17

  
	
  Section 4.3      Environmental Defects.

  	
   

  	
  18

  
	
  Section 4.4      Inspection Indemnity.

  	
   

  	
  19

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF
  SELLER

  	
   

  	
  19

  
	
  Section 5.1      Generally.

  	
   

  	
  19

  
	
  Section 5.2      Existence and Qualification.

  	
   

  	
  19

  
	
  Section 5.3      Power.

  	
   

  	
  20

  
	
  Section 5.4      Authorization and Enforceability.

  	
   

  	
  20

  
	
  Section 5.5      No Conflicts.

  	
   

  	
  20

  
	
  Section 5.6      Liability for Brokers’ Fees.

  	
   

  	
  20

  
	
  Section 5.7      Litigation.

  	
   

  	
  20

  
	
  Section 5.8      Taxes and Assessments.

  	
   

  	
  21

  
	
  Section 5.9      Compliance with Laws.

  	
   

  	
  21

  
	
  Section 5.10    Contracts.

  	
   

  	
  21

  
	
  Section 5.11    Payments
  for Hydrocarbon Production.

  	
   

  	
  21

  



 



 ii
 









 


 


	
  Section 5.12    Governmental
  Authorizations.

  	
   

  	
  22

  
	
  Section 5.13    Preference
  Rights and Transfer Requirements.

  	
   

  	
  22

  
	
  Section 5.14    Payout
  Balances.

  	
   

  	
  22

  
	
  Section 5.15    Outstanding
  Capital Commitments.

  	
   

  	
  22

  
	
  Section 5.16    Imbalances.

  	
   

  	
  22

  
	
  Section 5.17    Condemnation.

  	
   

  	
  23

  
	
  Section 5.18    Bankruptcy.

  	
   

  	
  23

  
	
  Section 5.19    PUHCA/NGA.

  	
   

  	
  23

  
	
  Section 5.20    Investment
  Company.

  	
   

  	
  23

  
	
  Section 5.21    Production
  Allowables.

  	
   

  	
  23

  
	
  Section 5.22    Plugging
  and Abandonment.

  	
   

  	
  24

  
	
  Section 5.23    Foreign
  Person.

  	
   

  	
  24

  
	
  Section 5.24    Collective
  Bargaining Agreements.

  	
   

  	
  24

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF
  PURCHASER

  	
   

  	
  24

  
	
   

  	
   

  	
   

  
	
  Section 6.1      Existence and Qualification.

  	
   

  	
  24

  
	
  Section 6.2      Power.

  	
   

  	
  24

  
	
  Section 6.3      Authorization and Enforceability.

  	
   

  	
  25

  
	
  Section 6.4      No Conflicts.

  	
   

  	
  25

  
	
  Section 6.5      Liability for Brokers’ Fees.

  	
   

  	
  25

  
	
  Section 6.6      Litigation.

  	
   

  	
  25

  
	
  Section 6.7      Financing.

  	
   

  	
  25

  
	
  Section 6.8      Limitation.

  	
   

  	
  25

  
	
  Section 6.9      SEC Disclosure.

  	
   

  	
  26

  
	
  Section 6.10    Bankruptcy.

  	
   

  	
  26

  
	
  Section 6.11    Qualification.

  	
   

  	
  26

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7 COVENANTS OF THE PARTIES

  	
   

  	
  26

  
	
   

  	
   

  	
   

  
	
  Section 7.1      Access.

  	
   

  	
  26

  
	
  Section 7.2      Government Reviews.

  	
   

  	
  27

  
	
  Section 7.3      Notification of Breaches.

  	
   

  	
  28

  
	
  Section 7.4      Letters-in-Lieu; Assignments;
  Operatorship.

  	
   

  	
  28

  
	
  Section 7.5      Public Announcements.

  	
   

  	
  29

  
	
  Section 7.6      Operation of Business.

  	
   

  	
  29

  
	
  Section 7.7      Preference Rights and Transfer
  Requirements.

  	
   

  	
  30

  
	
  Section 7.8      Tax Matters.

  	
   

  	
  32

  
	
  Section 7.9      Further Assurances.

  	
   

  	
  33

  
	
  Section 7.10    Reserved.

  	
   

  	
  33

  
	
  Section 7.11    Insurance;
  Financial Information.

  	
   

  	
  33

  



 



 iii
 









 


 


	
  Section 7.12    No
  Solicitation of Transactions.

  	
   

  	
  33

  
	
  Section 7.13    Transition
  Services Agreement.

  	
   

  	
  34

  
	
  Section 7.14    Employees.

  	
   

  	
  34

  
	
  Section 7.15    Hedges.

  	
   

  	
  34

  
	
  Section 7.16    Contribution
  of Oklahoma Assets.

  	
   

  	
  34

  
	
  Section 7.17    [RESERVED].

  	
   

  	
  35

  
	
  Section 7.18    Cure
  of Misrepresentations.

  	
   

  	
  35

  
	
  Section 7.19    NAGS.

  	
   

  	
  35

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8 CONDITIONS TO CLOSING

  	
   

  	
  35

  
	
   

  	
   

  	
   

  
	
  Section 8.1      Conditions of Seller to Closing.

  	
   

  	
  35

  
	
  Section 8.2      Conditions of Purchaser to
  Closing.

  	
   

  	
  36

  
	
   

  	
   

  	
   

  
	
  ARTICLE 9 CLOSING

  	
   

  	
  37

  
	
   

  	
   

  	
   

  
	
  Section 9.1      Time and Place of Closing.

  	
   

  	
  37

  
	
  Section 9.2      Obligations of Seller at Closing.

  	
   

  	
  37

  
	
  Section 9.3      Obligations of Purchaser at
  Closing.

  	
   

  	
  38

  
	
  Section 9.4      Closing Adjustments.

  	
   

  	
  38

  
	
   

  	
   

  	
   

  
	
  ARTICLE 10 TERMINATION

  	
   

  	
  40

  
	
   

  	
   

  	
   

  
	
  Section 10.1    Termination.

  	
   

  	
  40

  
	
  Section 10.2    Effect
  of Termination.

  	
   

  	
  41

  
	
  Section 10.3    Distribution
  of Deposit Upon Termination.

  	
   

  	
  41

  
	
   

  	
   

  	
   

  
	
  ARTICLE 11 POST-CLOSING OBLIGATIONS; INDEMNIFICATION;
  LIMITATIONS; DISCLAIMERS AND WAIVERS

  	
   

  	
  41

  
	
   

  	
   

  	
   

  
	
  Section 11.1    Receipts.

  	
   

  	
  41

  
	
  Section 11.2    Expenses.

  	
   

  	
  42

  
	
  Section 11.3    Assumed
  Seller Obligations.

  	
   

  	
  42

  
	
  Section 11.4    Survival.

  	
   

  	
  43

  
	
  Section 11.5    Indemnification
  by Seller.

  	
   

  	
  44

  
	
  Section 11.6    Indemnification
  by Purchaser.

  	
   

  	
  44

  
	
  Section 11.7    Indemnification
  Proceedings.

  	
   

  	
  45

  
	
  Section 11.8    Limitations
  on Indemnities.

  	
   

  	
  46

  
	
  Section 11.9    Release.

  	
   

  	
  47

  
	
  Section 11.10  Disclaimers.

  	
   

  	
  47

  
	
  Section 11.11  Waiver
  of Trade Practices Acts.

  	
   

  	
  49

  
	
  Section 11.12  Redhibition
  Waiver.

  	
   

  	
  49

  
	
  Section 11.13  Recording.

  	
   

  	
  49

  



 



 iv
 









 


 


	
  

  	
   

  	
   

  
	
  ARTICLE 12 MISCELLANEOUS

  	
   

  	
  50

  
	
   

  	
   

  	
   

  
	
  Section 12.1    Counterparts.

  	
   

  	
  50

  
	
  Section 12.2    Notice.

  	
   

  	
  50

  
	
  Section 12.3    Sales
  or Use Tax Recording Fees and Similar Taxes and Fees.

  	
   

  	
  51

  
	
  Section 12.4    Expenses.

  	
   

  	
  51

  
	
  Section 12.5    Change
  of Name.

  	
   

  	
  51

  
	
  Section 12.6    Replacement
  of Bonds, Letters of Credit and Guarantees.

  	
   

  	
  51

  
	
  Section 12.7    Governing
  Law and Venue.

  	
   

  	
  52

  
	
  Section 12.8    Captions.

  	
   

  	
  52

  
	
  Section 12.9    Waivers.

  	
   

  	
  52

  
	
  Section 12.10  Assignment.

  	
   

  	
  52

  
	
  Section 12.11  Entire
  Agreement.

  	
   

  	
  52

  
	
  Section 12.12  Amendment.

  	
   

  	
  52

  
	
  Section 12.13  No
  Third-Party Beneficiaries.

  	
   

  	
  53

  
	
  Section 12.14  References.

  	
   

  	
  53

  
	
  Section 12.15  Construction.

  	
   

  	
  53

  
	
  Section 12.16  Conspicuousness.

  	
   

  	
  54

  
	
  Section 12.17  Severability.

  	
   

  	
  54

  
	
  Section 12.18  Time
  of Essence.

  	
   

  	
  54

  
	
  Section 12.19  Affiliate
  Liability.

  	
   

  	
  54

  
	
  Section 12.20  Schedules.

  	
   

  	
  54

  
	
  Section 12.21  Limitation
  on Damages.

  	
   

  	
  54

  



 



 v
 









 


 


EXHIBITS


 


	
  Exhibit “A”

  	
  Leases and Mineral Interests

  
	
   

  	
   

  
	
  Exhibit
  “A-1”

  	
  Wells, Future Wells and Units

  
	
   

  	
   

  
	
  Exhibit
  “A-2”

  	
  Equipment

  
	
   

  	
   

  
	
  Exhibit
  “B”

  	
  Conveyance

  
	
   

  	
   

  
	
  Exhibit
  “C”

  	
  Indemnity Agreement

  
	
   

  	
   

  
	
  Exhibit
  “D”

  	
  Seismic License

  



 


 


SCHEDULES


 


 


	
  Schedule 1.2(d)

  	
  Contracts

  
	
   

  	
   

  
	
  Schedule
  1.2(e)

  	
  Surface Contracts

  
	
   

  	
   

  
	
  Schedule
  1.2(g)

  	
  Pipelines

  
	
   

  	
   

  
	
  Schedule
  1.3(e)

  	
  Excluded Items

  
	
   

  	
   

  
	
  Schedule
  1.4

  	
  Effective Time; Proration of Costs and Revenues

  
	
   

  	
   

  
	
  Schedule
  5.7(a)

  	
  Party Proceedings

  
	
   

  	
   

  
	
  Schedule
  5.7(b)

  	
  Non-Party Proceedings

  
	
   

  	
   

  
	
  Schedule
  5.8

  	
  Taxes and Assessments

  
	
   

  	
   

  
	
  Schedule
  5.9

  	
  Compliance with Laws

  
	
   

  	
   

  
	
  Schedule
  5.10

  	
  Certain Contract Matters

  
	
   

  	
   

  
	
  Schedule
  5.11

  	
  Hydrocarbon Production Payments

  
	
   

  	
   

  
	
  Schedule
  5.12

  	
  Governmental Authorizations

  
	
   

  	
   

  
	
  Schedule
  5.13

  	
  Preference Rights and Transfer Requirements

  
	
   

  	
   

  
	
  Schedule
  5.14

  	
  Payout Balances

  
	
   

  	
   

  
	
  Schedule
  5.15

  	
  Outstanding Capital Commitments

  
	
   

  	
   

  
	
  Schedule
  5.16

  	
  Imbalances

  
	
   

  	
   

  



 



 vi
 









 


 


	
  Schedule 5.22

  	
  Plugging and Abandonment

  
	
   

  	
   

  
	
  Schedule
  7.6

  	
  Operation of Business

  
	
   

  	
   

  
	
  Schedule
  7.15

  	
  Hedging Transactions

  



 


 



 vii















 


DEFINITIONS


“1031 Assets” has the meaning set forth in
Section 7.8(c).


“actual knowledge” has the meaning set forth in Section 5.1(a).


“Adjusted Purchase Price” shall mean the
Purchase Price after calculating and applying the adjustments set forth in Section 2.2.


“Adjustment Period” has the meaning set forth in
Section 2.2(a).


“AFE” means authority for expenditure.


“Affiliates” with respect to any Person, means
any Person that directly or indirectly controls, is controlled by or is under
common control with such Person.  The
concept of control, controlling or controlled as used in the aforesaid context
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of another, whether through the ownership
of voting securities, by contract or otherwise. 
No Person shall be deemed an Affiliate of any Person by reason of the
exercise or existence of rights, interests or remedies under this Agreement.


“Aggregate Benefit Deductible” has the meaning
set forth in Section 3.4(j).


“Aggregate Defect Deductible” has the meaning
set forth in Section 3.4(j).


“Agreed Accounting Firm” has the meaning set
forth in Section 9.4(b).


“Agreed Interest Rate” means the rate of
interest published in the Wall Street Journal
from time to time, as the one month London Interbank Offered Rate (LIBOR) plus
75 basis points, with adjustments in that rate to be made on the same day as
any change in that rate.


“Agreement” means this Purchase and Sale
Agreement.


“Allocated Value” has the meaning set forth in Section 3.4(a).


“AEP” has the meaning set forth in the preamble
hereto.


“APC” has the meaning set forth in the preamble
hereto.


“Assessment” has the meaning set forth in Section 4.1.


“Assets” has the meaning set forth in Section 1.2.


“Assumed Seller Obligations” has the meaning set
forth in Section 11.3.


“Audited Financial Statements” has the meaning
set forth in Section 7.1(c).


“Business Day” means each calendar day except
Saturdays, Sundays, and Federal holidays.


“CERCLA” has the meaning set forth in the
definition of Environmental Laws.


“Claim Notice” has the meaning set forth in Section 11.4(b).


 



 viii
 









 


“Closing” has the meaning set forth in Section 9.1(a).


“Closing Date” has the meaning set forth in Section 9.1(b).


“Closing Payment” has the meaning set forth in Section 9.4(a).


“Code” means the United States Internal Revenue
Code of 1986, as amended.


“Confidentiality Agreement” has the meaning set
forth in Section 7.1(a).


“Contracts” has the meaning set forth in Section 1.2(d).


“Conveyance” has the meaning set forth in Section 3.1(b).


“Counterparties” has the meaning set forth in Section 7.15.


“Cure Period” has the meaning set forth in Section 3.4(c).


“Deductible” has the meaning set forth in Section 11.8(a).


“Defensible Title” has the meaning set forth in Section 3.2.


“Deposit” has the meaning set forth in Section 2.4.


“DTPA” has the meaning set forth in Section 11.11(a).


“Earned” has the meaning set forth in Section 1.4(b).


“Effective Time” has the meaning set forth in Section 1.4(a).


“Environmental Claim Date” has the meaning set
forth in Section 4.3.


“Environmental Defect” has the meaning set forth
in Section 4.3.


“Environmental Defect Amount” has the meaning
set forth in Section 4.3.


“Environmental Defect Notice” has the meaning
set forth in Section 4.3.


“Environmental Laws” means, as the same may have
been amended, any federal, state or local statute, law, regulation, ordinance,
rule, order or decree including any rule of common law, relating to (i) the
control of any potential pollutant or protection of the environment, including
air, water or land, (ii) the generation, handling, treatment, storage, disposal
or transportation of waste materials, or (iii) the regulation of or exposure to
hazardous, toxic or other substances alleged to be harmful, including, but not
limited to, the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. § 9601 et seq. (“CERCLA”); the Resource
Conservation and Recovery Act, 42 U.S.C. § 6901 et seq. (“RCRA”); the
Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq.; the Clean
Air Act, 42 U.S.C. § 7401 et seq. the Hazardous Materials Transportation
Act, 49 U.S.C. § 1471 et seq.; the Toxic Substances Control Act, 15
U.S.C. §§ 2601 through 2629; the Oil Pollution Act, 33 U.S.C. § 2701 et seq.;
the Emergency Planning and Community Right-to-Know Act, 42 U.S.C. § 11001 et
seq.; the Safe Drinking Water Act, 42 U.S.C. §§ 300f through 300j; the
Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. § 136 et seq.; the
Occupational Safety and Health Act, 29 U.S.C. 



 ix
 









 


§ 651 et seq.; the Atomic Energy
Act, 42 U.S.C. § 2011 et seq.; and all applicable related law, whether
local, state, territorial, or national, of any Governmental Body having
jurisdiction over the property in question addressing pollution or protection
of human health, safety, natural resources or the environment and all
regulations implementing the foregoing. 
The term “Environmental Laws” includes all judicial and administrative
decisions, orders, directives, and decrees issued by a Governmental Body
pursuant to the foregoing.


“Environmental Liabilities” shall mean any and
all environmental response costs (including costs of remediation), damages,
natural resource damages, settlements, consulting fees, expenses, penalties,
fines, orphan share, prejudgment and post-judgment interest, court costs,
attorneys’ fees, and other liabilities incurred or imposed (i) pursuant to any
order, notice of responsibility, directive (including requirements embodied in
Environmental Laws), injunction, judgment or similar act (including
settlements) by any Governmental Body to the extent arising out of any
violation of, or remedial obligation under, any Environmental Laws which are
attributable to the ownership or operation of the Assets prior to the Effective
Time or (ii) pursuant to any claim or cause of action by a Governmental Body or
other Person for personal injury, property damage, damage to natural resources,
remediation or response costs to the extent arising out of any violation of, or
any remediation obligation under, any Environmental Laws which is attributable
to the ownership or operation of the Assets prior to the Closing.


“Equipment” has the meaning set forth in Section 1.2(f).


“ERISA” means the Employee Retirement Income Security
Act of 1974, as amended.


“Event” has the meaning set forth in definition
of Material Adverse Effect.


“Exchange Act” means the Securities Exchange Act
of 1934, as amended, together with the rules and regulations of the Securities
and Exchange Commission promulgated thereunder.


“Excluded Assets” has the meaning set forth in Section 1.3.


“Excluded Seller Obligations” has the meaning
set forth in Section 11.3.


“Final Purchase Price” has the meaning set forth
in Section 9.4(b).


“Final Settlement Date” has the meaning set
forth in Section 9.4(b).


“Fundamental Representations” has the meaning
set forth in Section 11.4(a).


“Future Well” means a well to be drilled in the
future on a Future Well Location, which (for the purposes of determining
Defensible Title thereto and any Title Defects associated therewith pursuant to
this Agreement) shall be treated as if such well had been drilled and completed
and was in existence at or prior to the Effective Time.


“Future Well Location” means each drilling
location identified on Exhibit A-1,
subject to any depth restriction set forth in such Exhibit A-1
with respect to such location.


“GAAP” means generally accepted accounting
principles in effect in the United States as amended from time to time.


“Governmental Authorizations” has the meaning
set forth in Section 5.12.



 x
 









 


“Governmental Body” or “Governmental Bodies”
means any federal, state, local, municipal, or other government; any
governmental, regulatory or administrative agency, commission, body, arbitrator
or arbitration panel or other authority exercising or entitled to exercise any
administrative, executive, judicial, legislative, police, regulatory or taxing
authority or power; and any court or governmental tribunal.


“Hazardous Material” means (i) any “hazardous
substance,” as defined by CERCLA, (ii) any “hazardous waste” or “solid waste,”
in either case as defined by RCRA, and any analogous state statutes, and any
regulations promulgated thereunder, (iii) any solid,  hazardous, dangerous or toxic chemical,
material, waste or substance, within the meaning of and regulated by any
applicable Environmental Laws, (iv) any radioactive material, including any
naturally occurring radioactive material, and any source, special or byproduct
material as defined in 42 U.S.C. 2011 et seq. and any amendments or
authorizations thereof, (v) any regulated asbestos-containing materials in any
form or condition, (vi) any regulated polychlorinated biphenyls in any form or
condition, and (vii) petroleum, petroleum hydrocarbons or any fraction or
byproducts thereof.


“Hedging Transactions” has the meaning set forth
in Section 7.15.


“Howell” has the meaning set forth in the
preamble hereto.


“HSR Act” means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.


“Hydrocarbons” means oil, gas, casinghead gas,
condensate and other gaseous and liquid hydrocarbons or any combination thereof
and sulphur and other minerals extracted from or produced with the foregoing.


“Imbalance” or “Imbalances” means any
over-production, under-production, over-delivery, under-delivery or similar
imbalance of Hydrocarbons produced from or allocated to the Assets, regardless
of whether such over-production, under-production, over-delivery under-delivery
or similar imbalance arises at the platform, wellhead, pipeline, gathering
system, transportation system, processing plant or other location.


“incurred” has the meaning set forth in Section 1.4(b).


“Indemnified Party” has the meaning set forth in
Section 11.7(a).


“Indemnifying Party” has the meaning set forth
in Section 11.7(a).


“Indemnity Agreement” has the meaning set forth
in Section 3.4(d)(ii).


“Independent Expert” has the meaning set forth
in Section 4.3.


“Individual Benefit Deductible” has the meaning
set forth in Section 3.4(j).


“Individual Environmental Deductible” has the
meaning set forth in Section 4.3.


“Individual Title Deductible” has the meaning
set forth in Section 3.4(j).


“Invasive Activity” has the meaning set forth in
Section 4.1.


“KMOG” has the meaning set forth in the preamble
hereto.



 xi
 









“Lands” has the meaning set forth in Section 1.2(a).


“Laws” means all statutes, laws, rules,
regulations, ordinances, orders, and codes of Governmental Bodies.


“Leases” has the meaning set forth in Section 1.2(a).


“Like-Kind Exchange” has the meaning set forth Section 7.8(c).


“Losses” means any and all debts, obligations
and other liabilities (whether absolute, accrued, contingent, fixed or
otherwise, or whether known or unknown, or due or to become due or otherwise),
diminution in value, monetary damages, fines, fees, Taxes, penalties, interest
obligations, deficiencies, losses and expenses (including amounts paid in
settlement, interest, court costs, costs of investigators, reasonable fees and
expenses of attorneys, accountants, financial advisors and other experts, and
other actual out of pocket expenses incurred in investigating and preparing for
or in connection with any Proceeding).


“Lowest Cost Response” means the response
required or allowed under Environmental Laws that addresses the condition
present at the lowest cost (considered as a whole taking into consideration any
material negative impact such response may have on the operations of the
relevant assets and any potential material additional costs or liabilities that
may likely arise as a result of such response) as compared to any other
response that is required or allowed under Environmental Laws.


“Material Adverse Effect” means any change,
inaccuracy, circumstance, effect, event, result, occurrence, condition or fact
(each an “Event”) (whether or not (i) foreseeable or known as of the date of
this Agreement or (ii) covered by insurance) that has had, or could reasonably
be expected to have, a material adverse effect on (i) the ownership, operation
or value of the Assets, taken as a whole, or (ii) the ability of Seller to
consummate the transactions contemplated hereby.  Excluded from such Events for the purposes of
determining whether a “Material Adverse Affect” has occurred or could
reasonably be expected to occur are (A) Events resulting from entering into
this Agreement or the announcement of the transactions contemplated by this
Agreement, (B) Events resulting from changes in general market, economic,
financial or political conditions or any outbreak of hostilities or war, (C)
Events that affect the Hydrocarbon exploration, production, development,
processing, gathering and/or transportation industry generally (including
changes in commodity prices or general market prices in the Hydrocarbon
exploration, production, development, processing, gathering and/or
transportation industry generally), and (D) any effect resulting from a change
in Laws or regulatory policies.


“Material Contracts” has the meaning set forth
in Section 5.10.


“Maximum Indemnity Amount” has the meaning set
forth in Section 11.8(a).


“Mineral Interests” has the meaning set forth in
Section 1.2(a).


“NAGS” means those certain gathering assets
owned by Anadarko Gathering Company that are subject to the NAGS Agreement.



 xii
 









 


“NAGS Agreement” means that certain Gas Purchase
and Sales Contract dated September 1, 1993, between APC and Anadarko Gathering
Company, as amended, that is described on Schedule 1.2(d).


“NGA” has the meaning set forth in Section 5.19.


“NGPA” has the meaning set forth in Section 5.19.


“Net Revenue Interest” has the meaning set forth
in Section 3.2(a).


“NORM” means naturally occurring radioactive
material.


“Notice Period” has the meaning set forth in Section 11.7(a).


“Permitted Encumbrances” has the meaning set
forth in Section 3.3.


“Permitted NAGS Buyer” means any of Oneok, Inc.,
Kinder Morgan, Inc., DCP Midstream Partners, LP or any of their respective
wholly-owned subsidiaries.


“Person” means any individual, firm,
corporation, partnership, limited liability company, joint venture,
association, trust, unincorporated organization, Governmental Body or any other
entity.


“Personal Property” has the meaning set forth in
Section 1.2(g).


“Pipelines” has the meaning set forth in Section 1.2(g).


“Preference Property” has the meaning set forth
in Section 7.7(b).


“Preference Right” means any right or agreement
that enables any Person to purchase or acquire any Asset or any interest
therein or portion thereof as a result of or in connection with (i) the sale,
assignment or other transfer of any Asset or any interest therein or portion thereof
or (ii) the execution or delivery of this Agreement or the consummation or
performance of the terms and conditions contemplated by this Agreement.


“Proceeding” or “Proceedings” has the meaning
set forth in Section 5.7.


“Properties” has the meaning set forth in Section 1.2(c).


“Property Costs” has the meaning set forth in Section 1.4(b).


“Proprietary Seismic Data” means all of Seller’s
proprietary geophysical, seismic and geological data collected or obtained from
any 3D seismic surveys, covering the Lands, including any processed or
reprocessed data.


“Purchase Price” has the meaning set forth in Section 2.1.


“Purchaser” has the meaning set forth in the
preamble hereto.


“Purchaser Indemnified Persons” has the meaning
set forth in Section 11.5.


“Q1” has the meaning set forth in Section 7.8(c).



 xiii
 









 


“RCRA” has the meaning set forth in the
definition of Environmental Laws.


“Records” has the meaning set forth in Section 1.2(i).


“REGARDLESS OF FAULT” means WITHOUT
REGARD TO THE CAUSE OR CAUSES OF ANY CLAIM, INCLUDING, WITHOUT LIMITATION, EVEN
THOUGH A CLAIM IS CAUSED IN WHOLE OR IN PART BY:


OTHER THAN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT,
THE NEGLIGENCE (WHETHER SOLE, JOINT, CONCURRENT, COMPARATIVE, CONTRIBUTORY,
ACTIVE OR PASSIVE), STRICT LIABILITY, OR OTHER FAULT OF THE SELLER INDEMNIFIED
PERSONS; AND/OR


A PRE-EXISTING DEFECT, WHETHER PATENT OR LATENT,
OF THE PREMISES OF PURCHASER’S PROPERTY OR SELLER’S PROPERTY (INCLUDING WITHOUT
LIMITATION THE ASSETS), INVITEES AND/OR THIRD PARTIES; AND/OR


THE UNSEAWORTHINESS OF ANY VESSEL OR
UNAIRWORTHINESS OF ANY AIRCRAFT OF A PARTY WHETHER CHARTERED, OWNED, OR
PROVIDED BY THE PURCHASER INDEMNIFIED PERSONS, SELLER INDEMNIFIED PERSONS,
INVITEES AND/OR THIRD PARTIES.


“Retained Asset” has the meaning set forth in Section 7.7(c).


“Retained Employee Liabilities” shall mean any
liabilities of Seller or any of its Affiliates (i) to employees of Seller or
any of its Affiliates arising under the Worker Adjustment and Retraining
Notification Act of 1988, as amended (or similar state or local law), as a
result of actions taken by Seller or any of its Affiliates on or prior to the
Closing, (ii) arising out of claims by or on behalf of employees of Seller or
any of its Affiliates with respect to events that occur on or prior to the Closing
and that relate to their employment with, or the terminations of their
employment from, Seller, (iii) with respect to employees of Seller or any of
its Affiliates arising under any “employee benefit plan” (as defined in Section
3(3) of ERISA) that is or has been sponsored by, contributed to, or maintained
by, Seller or any of its Affiliates, or (iv) arising under ERISA for which
Purchaser may have any liability under ERISA solely as a result of the
consummation of the transaction contemplated by this Agreement.


“Royalty Actions” means each Proceeding listed
under Category 3 on Schedule 5.7(a)
other than the Proceeding listed in item 6 and item 7 under the same category.


“Royalty Amounts” has the meaning set forth in Section 11.3.


“Securities Act” means the Securities Act of
1933, as amended.


“Seismic License” means that certain seismic
license covering Proprietary Seismic Data in the form attached hereto as Exhibit D.


“Seller” has the meaning set forth in the
preamble hereto.


“Seller Indemnified Persons” has the meaning set
forth in Section 11.6.


“Seller Operated Assets” means Assets operated
by Seller.



 xiv
 









 


“Statements of Revenues and Expenses” has the
meaning set forth in Section 7.1(b).


“Surface Contracts” has the meaning set forth in
Section 1.2(e).


“Tax Allocated Value” has the meaning set forth
in Section 2.3.


“Taxes” means all federal, state, local, and
foreign income, profits, franchise, sales, use, ad valorem, property,
severance, production, excise, stamp, documentary, real property transfer or
gain, gross receipts, goods and services, registration, capital, transfer, or
withholding taxes or other governmental fees or charges imposed by any
Governmental Body, including any interest, penalties or additional amounts
which may be imposed with respect thereto.


“Tax Returns” has the meaning set forth in Section 5.8(a).


“Termination Date” has the meaning set forth in Section 10.1(b)(i).


“Third Party Claim” has the meaning set forth in
Section 11.7(a).


“Title Arbitrator” has the meaning set forth in Section 3.4(i).


“Title Benefit” has the meaning set forth in Section 3.2(d).


“Title Benefit Amount” has the meaning set forth
in Section 3.4(e).


“Title Benefit Notice” has the meaning set forth
in Section 3.4(b).


“Title Claim Date” has the meaning set forth in Section 3.4(a).


“Title Defect” has the meaning set forth in Section 3.2(d).


“Title Defect Amount” has the meaning set forth
in Section 3.4(d)(i).


“Title Defect Notice” has the meaning set forth
in Section 3.4(a).


“Title Defect Property” has the meaning set forth
in Section 3.4(a).


“Transfer Requirement” means any consent,
approval, authorization or permit of, or filing with or notification to, any
Person which is required to be obtained, made or complied with for or in
connection with any sale, assignment or transfer of any Asset or any interest
therein; provided, however, that “Transfer Requirement” shall not include any
consent of, notice to, filing with, or other action by any Governmental Body in
connection with the sale or conveyance of oil and/or gas leases or interests
therein or Surface Contracts or interests therein, if they are not required
prior to the assignment of such oil and/or gas leases, Surface Contracts or
interests or they are customarily obtained subsequent to the sale or conveyance
(including consents from state agencies).


“Transfer Taxes” has the meaning set forth in Section 12.3.


“Transition Services Agreement” has the meaning
set forth in Section 7.13.


“Units” has the meaning set forth in Section 1.2(c).


“UTPCPL” has the meaning set forth in Section 11.11(a).



 xv
 









 


“Warranty Well” means a Well or a Future Well, as the context requires.


 


“Wells” has the meaning set forth in Section 1.2(b).


 



 xvi















 


PURCHASE AND SALE AGREEMENT


This Purchase and Sale Agreement is executed on
February 1, 2007, by and among Anadarko Petroleum Corporation, a Delaware
corporation (“APC”), Anadarko E&P Company LP, a Delaware limited
partnership (“AEP”), Howell Petroleum Corporation, a Delaware corporation (“Howell”),
and Kerr-McGee Oil & Gas Onshore LP, a Delaware limited partnership (“KMOG”;
APC, AEP, Howell and KMOG are collectively called “Seller”), and EXCO
Resources, Inc., a Texas corporation (“Purchaser”).


RECITALS


A.            Seller
owns the Assets as more fully described in Section 1.2 and
the exhibits hereto.


B.            Seller
desires to sell to Purchaser and Purchaser desires to purchase from Seller the
properties and rights of Seller hereafter described, in the manner and upon the
terms and conditions hereafter set forth.


NOW, THEREFORE, in consideration of the premises and
of the mutual promises, representations, warranties, covenants, conditions and
agreements contained herein, and for other valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto, intending
to be legally bound by the terms hereof, agree as follows:


ARTICLE 1

PURCHASE AND SALE


Section 1.1            Purchase
and Sale.


At the Closing, and upon the terms and subject to the
conditions of this Agreement, Seller agrees to sell, transfer and convey the
Assets to Purchaser and Purchaser agrees to purchase, accept and pay for the
Assets and to assume the Assumed Seller Obligations.


Section 1.2            Assets.


As used herein, the term “Assets” means, subject to
the terms and conditions of this Agreement, all of Seller’s right, title,
interest and estate, real or personal, recorded or unrecorded, movable or
immovable, tangible or intangible, in and to the following (but excluding the
Excluded Assets):


(a)           All (i) of the oil and gas leases; subleases and other
leaseholds; carried interests; farmout rights; options; and other properties
and interests described on Exhibit A,
subject to such depth limitations and other restrictions as may be set forth on
Exhibit A (collectively, the “Leases”)
and (ii) fee mineral interests, fee royalty interests and other fee interests
in oil, gas and other minerals described on Exhibit
A (collectively, the “Mineral Interests”), (in each case) together
with each and every kind and character of right, title, claim, and interest
that Seller has in and to the lands covered by the Leases and the Mineral
Interests and the interests currently pooled, unitized, communitized or
consolidated therewith (the “Lands”);


(b)           All oil, gas, water or injection wells located on the
Lands, whether producing, shut-in, or temporarily abandoned, including the
interests in the wells shown on Exhibit A-1
attached hereto (collectively, the “Wells”);



 1
 









 


(c)           All interests of Seller in or to any currently existing
pools or units which include any Lands or all or a part of any Leases or
Mineral Interests or include any Wells, including those pools or units shown on
Exhibit A-1 (the “Units”; the
Units, together with the Leases, Mineral Interests, Lands and Wells, being
hereinafter referred to as the “Properties”), and including all interests of
Seller in production of Hydrocarbons from any such Unit, whether such Unit
production of Hydrocarbons comes from Wells located on or off of a Lease or the
Mineral Interests, and all tenements, hereditaments and appurtenances belonging
to the Leases, the Mineral Interests and Units;


(d)           All contracts, agreements and instruments by which the
Properties are bound or subject, or that relate to or are otherwise applicable
to the Properties, only to the extent applicable to the Properties rather than
Seller’s or any of its Affiliates’ other properties, including but not limited
to, operating agreements, unitization, pooling and communitization agreements,
declarations and orders, joint venture agreements, farmin and farmout
agreements, exploration agreements, participation agreements, exchange
agreements, transportation or gathering agreements, agreements for the sale and
purchase of oil, gas or casinghead gas and processing agreements to the extent
applicable to the Properties or the production of Hydrocarbons produced in
association therewith from the Properties, including those identified on Schedule 1.2(d) (hereinafter collectively
referred to as “Contracts”), but excluding any contracts, agreements and
instruments to the extent transfer would result in a violation of applicable
Law or is restricted by any Transfer Requirement that is not waived by
Purchaser or satisfied pursuant to Section
7.7 and provided that “Contracts” shall not include the instruments
constituting the Leases;


(e)           All easements, permits, licenses, servitudes,
rights-of-way, surface leases and other surface rights (“Surface Contracts”)
appurtenant to, and used or held for use in connection with the Properties
(including those identified on Schedule
1.2(e)), but excluding any permits and other rights to the extent
transfer would result in a violation of applicable Law or is restricted by any
Transfer Requirement that is not waived by Purchaser or satisfied pursuant to Section 7.7;


(f)            All
treatment and processing plants and equipment, machinery, fixtures and other
tangible personal property and improvements located on the Properties or used
or held for use in connection with the operation of the Properties, including
those identified on Exhibit A-2
(“Equipment”);


(g)           All
flow lines, pipelines, gathering systems and appurtenances thereto located on
the Properties or used, or held for use, in connection with the operation of
the Properties, including those identified on Schedule
1.2(g) (“Pipelines” and, together with the Equipment and Wells, “Personal
Property”);


(h)           All
Hydrocarbons produced from or attributable to the Leases, Mineral Interests,
Lands, and Wells from and after the Effective Time, together with Imbalances
associated with the Properties;


(i)            All
lease files; land files; well files; gas and oil sales contract files; gas
processing files; division order files; abstracts; title opinions; land
surveys; logs; maps; engineering data and reports; interpretive data, technical
evaluations and technical outputs; and other books, records, data, files, and
accounting records, in each case to the extent related to the Assets, or used
or held for use in connection with the maintenance or operation thereof, but
excluding (i) any books, records, data, files, logs, maps, evaluations,
outputs, and accounting records to the 


 



 2
 









 


extent disclosure or transfer would result in a violation of applicable
Law or is restricted by any Transfer Requirement that is not satisfied pursuant
to Section 7.7, (ii) computer or
communications software or intellectual property (including tapes, codes, data
and program documentation and all tangible manifestations and technical
information relating thereto), (iii) attorney-client privileged communications
and work product of Seller’s or any of its Affiliates’ legal counsel (other
than title opinions), (iv) reserve studies and evaluations, and (v) records
relating to the negotiation and consummation of the sale of the Assets (subject
to such exclusions, the “Records”); provided, however, that Seller may retain
the originals of such Records as Seller has reasonably determined may be
required for existing litigation, tax, accounting, and auditing purposes; and


(j)            All
vehicles or vessels used exclusively in connection with the Assets.


Section 1.3            Excluded
Assets.


Notwithstanding the foregoing, the Assets shall not
include, and there is excepted, reserved and excluded from the transaction
contemplated hereby (collectively, the “Excluded Assets”):


(a)           except
to the extent necessary to satisfy Seller’s obligations under Section 7.1(b), (i) all corporate,
financial, income and franchise tax and legal records of Seller that relate to
Seller’s business generally (whether or not relating to the Assets), (ii) all
books, records and files that relate to the Excluded Assets, (iii) those
records retained by Seller pursuant to Section
1.2(i) and (iv) copies of any other Records retained by Seller
pursuant to Section 1.5;


(b)           subject
to the Seismic License, all geological and geophysical data (including all
seismic data, including reprocessed data), reserve estimates, economic
estimates, and, to the extent excluded from Section
1.2(i), all logs, interpretive data, technical evaluations and
technical outputs;


(c)           all
rights to any refund related to the Excluded Seller Obligations or Taxes or
other costs or expenses borne by Seller or Seller’s predecessors in interest
and title attributable to periods prior to the Effective Time;


(d)           Seller’s
area-wide bonds, permits and licenses or other permits, licenses or
authorizations used in the conduct of Seller’s business generally;


(e)           those
items listed in Schedule 1.3(e);


(f)            all
trade credits, account receivables, note receivables, take-or-pay amounts
receivable, and other receivables attributable to the Assets with respect to
any period of time prior to the Effective Time;


(g)           all
claims and causes of action described in Schedule
5.7;


(h)           except
to the extent specifically provided in Section
1.2(j), all right, title and interest of Seller in and to vehicles
or vessels used in connection with the Assets;


(i)            all
rights, titles, claims and interests of Seller or any Affiliate of Seller (i)
to or under any policy or agreement of insurance or any insurance proceeds; except
to the extent provided in Section 3.5,
and (ii) to or under any bond or bond proceeds;



 3
 









 


(j)            subject
to Section 12.5, any patent,
patent application, logo, service mark, copyright, trade name or trademark of
or associated with Seller or any Affiliate of Seller or any business of Seller
or of any Affiliate of Seller;


(k)           a
nonexclusive right to freely use any copies of any logs, interpretive data,
technical outputs, technical evaluations, maps, engineering data and reports,
reserve studies and evaluations, and other data and information being
transferred as a part of the Assets that Seller is entitled to retain pursuant
to Section 1.5; and


(l)            all
Retained Assets not conveyed to Purchaser pursuant to Section 7.7 and any Property excluded
pursuant to Section 3.4(d)(iii).


Section 1.4            Effective
Time; Proration of Costs and Revenues.


(a)           Subject
to Section 1.5, possession of the
Assets shall be transferred from Seller to Purchaser at the Closing, but
certain financial benefits and burdens of the Assets shall be transferred
effective as of 7:00 A.M., local time, where the respective Assets are located,
on January 1, 2007 (the “Effective Time”), as described below.


(b)           Purchaser
shall be entitled to all Hydrocarbon production from or attributable to the
Properties at and after the Effective Time (and all products and proceeds
attributable thereto), and to all other income, proceeds, receipts and credits
earned with respect to the Assets at or after the Effective Time, and shall be
responsible for (and entitled to any refunds with respect to) all Property
Costs incurred at and after the Effective Time. Seller shall be entitled to all
Hydrocarbon production from or attributable to the Properties prior to the
Effective Time (and all products and proceeds attributable thereto), and to all
other income, proceeds, receipts and credits earned with respect to the Assets
prior to the Effective Time, and shall be responsible for (and entitled to any
refunds with respect to) all Property Costs incurred prior to the Effective Time.
“Earned” and “incurred”, as used in this Agreement, shall be interpreted in
accordance with GAAP and Council of Petroleum Accountants Society (COPAS)
standards, as applicable. “Property Costs” means all costs attributable to the
ownership and operation of the Assets (including without limitation costs of
insurance relating specifically to the Assets and ad valorem, property,
severance, Hydrocarbon production and similar Taxes based upon or measured by
the ownership or operation of the Assets or the production of Hydrocarbons
therefrom, but excluding any other Taxes) and capital expenditures incurred in
the ownership and operation of the Assets in the ordinary course of business
and, where applicable, in accordance with the relevant operating or unit agreement,
if any, and overhead costs charged to the Assets under the relevant operating
agreement or unit agreement, if any, or, if none, the amounts shown under Schedule 1.4 shall be the overhead amounts
deemed charged to the Assets, but excluding without limitation liabilities,
losses, costs, and expenses attributable to (i) claims for personal injury or
death, property damage or violation of any Law, (ii) obligations to plug wells
or dismantle, abandon and salvage facilities, (iii) obligations to remediate
any contamination of groundwater, surface water, soil, Equipment or Pipelines
under applicable Environmental Laws, (iv) obligations to furnish make-up gas
according to the terms of applicable gas sales, gathering or transportation
contracts, (v) gas balancing obligations and (vi) obligations to pay working
interests, royalties, overriding royalties or other interests held in suspense,
all of which are addressed in Article 11
or elsewhere in this Agreement.  For
purposes of this Section 1.4,
determination of whether Property Costs are attributable to the period before
or after the Effective Time shall be based on when services are rendered, when
the goods are delivered, or when the work is performed.  For clarification, the date an item or work
is ordered is not the date of a pre-Effective Time transaction for settlement
purposes, but 



 4
 









 


rather the date on which the item ordered is delivered to the job site,
or the date on which the work ordered is performed, shall be the relevant
date.  For purposes of allocating
Hydrocarbon production (and accounts receivable with respect thereto), under
this  Section
1.4, (i) liquid Hydrocarbons shall be deemed to be “from or
attributable to” the Properties when they are placed into the storage
facilities and (ii) gaseous Hydrocarbons shall be deemed to be “from or
attributable to” the Properties when they pass through the delivery point sales
meters on the pipelines through which they are transported. Seller shall
utilize reasonable interpolative procedures to arrive at an allocation of
Hydrocarbon production when exact meter readings or gauging and strapping data
is not available. Seller shall provide to Purchaser, no later than three (3)
Business Days prior to Closing, all data necessary to support any estimated
allocation, for purposes of establishing the adjustment to the Purchase Price
pursuant to Section 2.2 hereof
that will be used to determine the Closing Payment.  Property Costs that are paid periodically
shall be prorated based on the number of days in the applicable period falling
before and the number of days in the applicable period falling at or after the
Effective Time, except that Hydrocarbon production, severance and similar Taxes
shall be prorated based on the number of units actually produced, purchased or
sold or proceeds of sale, as applicable, before, and at or after, the Effective
Time. In each case, Purchaser shall be responsible for the portion allocated to
the period at and after the Effective Time and Seller shall be responsible for
the portion allocated to the period before the Effective Time.


Section 1.5            Delivery
and Maintenance of Records.


Seller, at Seller’s sole cost and expense, shall
deliver the Records (FOB Seller’s office) to Purchaser within thirty (30) days
following Closing; provided, however, that Seller shall be entitled to retain those
original Records necessary to comply with its obligations under the Transition
Services Agreement for so long as is reasonably necessary to comply with its
obligations under the Transition Services Agreement and Seller, at Purchaser’s
sole expense, shall provide Purchaser with copies of any such original Records
retained by Seller as soon as reasonably practicable.  Other than any original Records retained by
Seller pursuant to Section 1.2(i),
Purchaser shall be entitled to all original Records maintained by Seller (other
than such Records maintained at the Grogans Mill offsite storage facility,
which is addressed below)  ,and a scanned
copy of all of the original Records and, to the extent available and specifically
identifiable to the Assets, original Records maintained by Seller at its
Grogans Mill offsite storage facility. 
Seller shall be entitled to keep a copy or copies of all Records;
provided, however, that Seller shall not sell or otherwise allow third parties
to review, copy or otherwise use (for any purpose) any Records retained by
Seller for their own account.  Purchaser
shall preserve the Records for a period of ten (10) years following the Closing
and will allow Seller and its representatives, consultants and advisors
reasonable access, during normal business hours and upon reasonable notice, to
the Records for any legitimate business reason of Seller, including in order
for Seller to comply with a Tax or other legally required reporting obligation
or Tax or legal dispute; provided, however, that Purchaser shall not be
required to grant access to Seller or any of its representatives, consultants
or advisors, to any Records that are subject to an attorney/client or attorney
work product privilege or that would cause Purchaser to violate any obligation
to any third party or breach any restriction legally binding on Purchaser.  Any such access shall be at the sole cost and
expense of Seller.  Unless otherwise
consented to in writing by Seller, for a period of ten (10) years following the
Closing Date, Purchaser shall not and shall cause its Affiliates not to,
destroy, alter or otherwise dispose of the Records, or any portions thereof,
without first giving at least thirty (30) days prior written notice to Seller
and offering to surrender to Seller the Records or such portions thereof.



 5
 









 


ARTICLE 2

PURCHASE PRICE


Section 2.1            Purchase
Price.


The purchase price for the Assets (the “Purchase Price”)
shall be $860,000,000 adjusted as provided in Section 2.2.


Section 2.2            Adjustments
to Purchase Price.


The Purchase Price for the Assets shall be adjusted in
the manner specified below (without duplication), with all such amounts being
determined in accordance with GAAP and Council of Petroleum Accountants Society
(COPAS) standards, as applicable, in order to reach the Adjusted Purchase
Price:


(a)           Reduced
by the aggregate amount of the following proceeds received by Seller between
(and including) the Effective Time and the Closing Date (with the period
between the Effective Time and the Closing Date referred to as the “Adjustment
Period”): (i) proceeds from the sale of Hydrocarbons (net of any royalties,
overriding royalties or other burdens on or payable out of production,
gathering, processing and transportation costs and any production, severance,
sales, excise or similar Taxes not reimbursed to Seller by the purchaser of
production) produced from or attributable to the Properties during the
Adjustment Period, and (ii) other proceeds earned with respect to the Assets during
the Adjustment Period;


(b)           Reduced
to the extent provided in Section 7.7
with respect to Preference Rights and Retained Assets;


(c)           (i)
If the parties make the election under Section
3.4(d)(i) with respect to a Title Defect, subject to the Individual
Title Deductible and the Aggregate Defect Deductible, reduced by the Title
Defect Amount with respect to such Title Defect if the Title Defect Amount has
been determined prior to Closing and (ii) subject to the Individual Benefit
Deductible and the Aggregate Benefit Deductible, increased by the Title Benefit
Amount with respect to each Title Benefit for which the Title Benefit Amount
has been determined prior to Closing;


(d)           Increased
by the amount of all Property Costs and other costs attributable to the
ownership and operation of the Assets which are paid by Seller and incurred
during the Adjustment Period (including any overhead costs under Schedule 1.4 deemed charged to the Assets
with respect to the Adjustment Period even though not actually paid), except
any Property Costs and other such costs already deducted in the determination
of proceeds in Section 2.2(a);


(e)           Reduced
to the extent provided in Section 3.4(d)(iii)
for any Properties excluded from the Assets pursuant to Section 3.4(d)(iii) and reduced to the
extent provided in Section 4.3 for
Environmental Defects;


(f)            Reduced
by the aggregate amounts payable to owners of working interests, royalties and
overriding royalties and other interests in the Properties held in suspense by
Seller as of the Closing Date;


(g)           Increased
or reduced as mutually agreed upon in writing prior to Closing by Seller and
Purchaser;



 6
 









 


(h)           Increased
by the value of the amount of merchantable Hydrocarbons stored in tanks and
pipelines attributable to the ownership and operation of the Assets that belong
to Seller as of the Effective Time (which value shall be computed at the
applicable third-party contract prices for the month of December 2006 for such
stored Hydrocarbons); and


(i)            Reduced
by the actual net aggregate Imbalances, if any, owed by Seller to
third-parties, as of the Effective Time, multiplied by a price of $3.00 per
MMBtu.


Each adjustment made pursuant to Section
2.2(a) shall serve to satisfy, up to the amount of the adjustment,
Purchaser’s entitlement under Section 1.4 to
Hydrocarbon production from or attributable to the Properties during the
Adjustment Period, and to the value of other income, proceeds, receipts and
credits earned with respect to the Assets during the Adjustment Period, and as
such, Purchaser shall not have any separate rights to receive any Hydrocarbon
production or income, proceeds, receipts and credits with respect to which an
adjustment has been made. Similarly, the adjustment described in Section 2.2(d) shall serve to satisfy, up to the amount of
the adjustment, Purchaser’s obligation under Section 1.4
to pay Property Costs and other costs attributable to the ownership and
operation of the Assets which are incurred during the Adjustment Period, and as
such, notwithstanding anything in this Agreement to the contrary, Purchaser
shall not be separately obligated to pay for any Property Costs or other such
costs with respect to which an adjustment has been made.


The Purchase Price less the Deposit provided for in Section 2.4, adjusted as set forth in (a) through (i), shall
be increased by simple interest thereon from the Effective Time to the Closing
Date, computed at the Agreed Interest Rate.


Section 2.3            Allocation
of Purchase Price for Tax Purposes


Purchaser and Seller will use commercially reasonable
efforts to agree, on or before the Closing Date, upon an allocation of the
unadjusted Purchase Price among each of the Assets, in compliance with the
principles of Section 1060 of the Code, and the Treasury regulations
thereunder.  Such allocation of value
shall be generally treated as Class V assets for purposes of Internal Revenue
Service Form 8594 to the extent possible consistent with the character of the
Assets involved. The “Tax Allocated Value” for any Asset equals the portion of
the unadjusted Purchase Price to be allocated to such Asset by the parties
pursuant to this Section  2.3,
increased or reduced as described in this Article 2.  Any adjustments to the Purchase Price other
than the adjustments provided for in Sections 2.2(b),
2.2(c), and 2.2(e)
shall be applied on a pro rata basis to the amounts agreed to by the parties
pursuant to this Section 2.3 for all Assets to the
maximum extent possible consistent with the character of the adjustments.  After all such adjustments are made, any adjustments
to the Purchase Price pursuant to Sections 2.2(b), 2.2(c), and 2.2(e) shall be
applied to the amounts agreed to by the parties pursuant to this Section 2.3 for the particular affected Assets. After Seller
and Purchaser have agreed on the Tax Allocated Values for the Assets, Seller
will be deemed to have accepted such Tax Allocated Values for purposes of this
Agreement and the transactions contemplated hereby, but otherwise makes no
representation or warranty as to the accuracy of such values. Seller and
Purchaser agree (i) that the Tax Allocated Values shall be used by Seller and
Purchaser as the basis for reporting asset values and other items for purposes
of all federal, state, and local Tax Returns, including without limitation
Internal Revenue Service Form 8594 and (ii) that neither they nor their
Affiliates will take positions inconsistent with the Tax Allocated Values in
notices to Governmental Bodies, in audit or other proceedings with respect to
Taxes unless required by applicable Law or with the consent of the other
party.  Purchaser and Seller agree that
each shall furnish the other a copy of Form 8594 (Asset Acquisition Statement
under Section 1060) 



 7
 









 


proposed to be filed with
the Internal Revenue Service by such party or any Affiliate thereof within ten
(10) days prior to such filing.


Section 2.4            Deposit


On or before 12:00 p.m. on
February 2, 2007, Purchaser will pay to Seller an earnest money deposit
in an amount equal to $43,000,000 (the “Deposit”).  The Deposit shall be non-interest bearing and
applied against the Purchase Price if the Closing occurs or shall be otherwise
distributed in accordance with the terms of this Agreement.


ARTICLE 3

TITLE MATTERS


Section 3.1            Seller’s
Title.


(a)           Except
for the special warranty of title referenced in Section 3.1(b) and without limiting Purchaser’s right to
adjust the Purchase Price by operation of this Article 3, Seller makes no warranty or representation,
express, implied, statutory or otherwise, with respect to Seller’s title to any
of the Assets, and Purchaser hereby acknowledges and agrees that the sole
remedy for any defect of title, including any Title Defect, with respect to any
of the Assets (i) before Closing, shall be as set forth in Section 3.4(d) and (ii) after Closing,
shall be pursuant to the special warranty of title referenced in Section 3.1(b).


(b)           The
conveyance covering the Assets to be delivered by Seller to Purchaser shall be
substantially in the form of Exhibit B
hereto (the “Conveyance”).  The
Conveyance shall contain a special warranty of Defensible Title by, through and
under Seller and its Affiliates, but not otherwise, to the Units, Warranty
Wells and other Assets shown on Exhibit A-1,
subject to the Permitted Encumbrances, but shall otherwise be without warranty
of title of any kind, express, implied or statutory or otherwise.


(c)           Purchaser
shall not be entitled to protection under Seller’s special warranty of title in
the Conveyance against any Title Defect reported by Purchaser under Section 3.4(a) and/or any Title Defect actually
known by any officer of Purchaser or any of its Affiliates prior to the Title
Claim Date.


(d)           Notwithstanding
anything herein provided to the contrary, if a Title Defect under this Article 3 results from any matter which
could also result in the breach of any representation or warranty of Seller set
forth in Article 5, then Purchaser
shall only be entitled to assert such matter (i) before Closing, as a Title
Defect to the extent permitted by this Article
3, or (ii) after Closing, as a breach of Seller’s special warranty
of title contained in the Conveyance to the extent permitted by this Section 3.1, and shall be precluded from
also asserting such matter as the basis of the breach of any such
representation or warranty.


Section 3.2            Definition
of Defensible Title.


As used in this Agreement, the term “Defensible Title”
means that title of Seller with respect to the Units, Warranty Wells or other
Assets shown in Exhibit A-1 that, except for and
subject to Permitted Encumbrances:


(a)           Entitles Seller to receive a share of the Hydrocarbons
produced, saved and marketed from any Unit, Warranty Well or other Asset shown
in Exhibit A-1 throughout the 



 8
 









 


duration of the productive life of such Unit,
Warranty Well or other Asset (after satisfaction of all royalties, overriding
royalties, net profits interests or other similar burdens on or measured by
production of Hydrocarbons) (a “Net Revenue Interest”), of not less than the
Net Revenue Interest shown in Exhibit A-1
for such Unit, Warranty Well or other Asset, except (solely to the extent that
such actions do not cause a breach of Seller’s covenants under Section 7.6) for decreases in connection
with those operations in which Seller may from and after the Effective Time
become a non-consenting co-owner, decreases resulting from the establishment or
amendment from and after the Effective Time of pools or units, and decreases
required to allow other working interest owners to make up past underproduction
or pipelines to make up past under deliveries, and except as stated in such Exhibit A-1;


(b)           Obligates Seller to bear a percentage of the costs and
expenses for the maintenance and development of, and operations relating to,
(i) any Unit, Warranty Well or other Asset shown in Exhibit A-1  not greater
than the “working interest” shown in Exhibit
A-1 for such Unit, Warranty Well or other Asset without increase
throughout the productive life of such Unit, Warranty Well or other Asset,
except as stated in Exhibit  A-1 and except for increases resulting from
contribution requirements with respect to non-consenting co-owners under
applicable operating agreements and increases that are accompanied by at least
a proportionate increase in Seller’s Net Revenue Interest; and


(c)           Is free and clear of liens, encumbrances, obligations,
security interests, irregularities, pledges, or other defects.


(d)           As used in this Agreement, the term “Title Defect” means
any lien, charge, encumbrance, obligation (including contract obligation),
defect, or other matter (including without limitation a discrepancy in Net
Revenue Interest or working interest) that causes Seller not to have Defensible
Title in and to the Units, Warranty Wells or other Assets shown on Exhibit A-1 as of the Effective Time and
the Closing. As used in this Agreement, the term “Title Benefit” shall mean any
right, circumstance or condition that operates to increase the Net Revenue
Interest of Seller in any Unit, Warranty Well or other Asset shown on Exhibit A-1, without causing a greater than
proportionate increase in Seller’s working interest above that shown in Exhibit A-1 as of the Effective Time.
Notwithstanding the foregoing, the following shall not be considered Title
Defects:


(i)                                     defects
based solely on (1) lack of information in Seller’s files, or (2) references to
a document(s) if such document(s) is not in Seller’s files;


(ii)                                  defects
arising out of lack of corporate or other entity authorization unless Purchaser
provides affirmative evidence that the action was not authorized;


(iii)                               defects
based on failure to record Leases issued by any state or federal Governmental
Body, or any assignments of such Leases, in the real property, conveyance or
other records of the county or parish in which such Property is located;


(iv)                              defects
based on a gap in Seller’s chain of title in the county or parish records as to
Leases, unless such gap is affirmatively shown to exist in such records by an
abstract of title, title opinion or landman’s title chain which documents shall
be included in a Title Defect Notice; and


(v)                                 defects
that have been cured by applicable Laws of limitation or prescription.



 9
 









 


Section 3.3            Definition
of Permitted Encumbrances.


As used herein, the term “Permitted Encumbrances”
means any or all of the following:


(a)           Royalties and any overriding royalties, reversionary
interests and other burdens on production, to the extent that any such burden
does not reduce Seller’s Net Revenue Interest below that shown in Exhibit A-1 or increase Seller’s working
interest above that shown in Exhibit A-1
without a proportionate increase in the Net Revenue Interest;


(b)           All Leases, unit agreements, pooling agreements, operating
agreements, Hydrocarbon production sales contracts, division orders and other
contracts, agreements and instruments applicable to the Assets, to the extent
that they do not, individually or in the aggregate, reduce Seller’s Net Revenue
Interest below that shown in Exhibit A-1
or increase Seller’s working interest above that shown in Exhibit A-1 without a proportionate
increase in the Net Revenue Interest;


(c)           Preference Rights applicable to this or any future
transaction;


(d)           Transfer Requirements applicable to this or any future
transaction;


(e)           Liens for current Taxes or assessments not yet delinquent;


(f)            Materialman’s, mechanic’s, repairman’s, employee’s, contractor’s,
operator’s and other similar liens or charges arising in the ordinary course of
business for amounts not yet delinquent (including any amounts being withheld
as provided by Law);


(g)           All rights to consent by, required notices to, filings
with, or other actions by Governmental Bodies in connection with the sale or
conveyance of the Assets or interests therein pursuant to this or to any future
transaction if they are not required or customarily obtained prior to the sale
or conveyance;


(h)           Rights of reassignment arising upon final intention to
abandon or release the Assets, or any of them;


(i)            Easements, rights-of-way, servitudes, permits, surface
leases and other rights in respect of surface operations, to the extent that
they do not (i) reduce Seller’s Net Revenue Interest below that shown in Exhibit A-1, (ii) increase Seller’s working
interest above that shown in Exhibit A-1
without a proportionate increase in Net Revenue Interest, or (iii) detract in
any material respect from the value of, or interfere in any material respect
with the use, ownership or operation of, the Assets subject thereto or affected
thereby (as currently used, owned and operated) and which would be acceptable
by a reasonably prudent purchaser engaged in the business of owning and
operating oil and gas properties;


(j)            Calls on Hydrocarbon production under existing Contracts
that are listed on Schedule 1.2(d);


(k)           All rights reserved to or vested in any Governmental Body
to control or regulate any of the Assets in any manner, and all obligations and
duties under all applicable Laws or under any franchise, grant, license or
permit issued by any such Governmental Body;


 



 10















(l)            Any
encumbrance on or affecting the Assets which is discharged by Seller at or
prior to Closing;


(m)          Any
matters shown on Exhibit A-1;


(n)           Any
other liens, charges, encumbrances, defects or irregularities which do not,
individually or in the aggregate, detract in any material respect from the
value of, or interfere in any material respect with the use or ownership of,
the Assets subject thereto or affected thereby (as currently used or owned),
which would be accepted by a reasonably prudent purchaser engaged in the
business of owning and operating oil and gas properties, and which do not
reduce Seller’s Net Revenue Interest below that shown in Exhibit A-1, or increase Seller’s working
interest above that shown in Exhibit A-1
without a proportionate increase in Net Revenue Interest;


(o)           Matters
that would otherwise be considered Title Defects but that do not meet the
Individual Title Deductible set forth in Section
3.4(j);


(p)           Imbalances
associated with the Assets; and


(q)           Liens
granted under applicable joint operating agreements.


Section 3.4            Notice
of Title Defect Adjustments.


(a)           To
assert a claim of a Title Defect prior to Closing, Purchaser must deliver claim
notices to Seller (each a “Title Defect Notice”) on or before April 2, 2007
(the “Title Claim Date”); provided, however, that Purchaser agrees that it
shall furnish Seller once every two (2) weeks, commencing on the  fourteenth (14th) day following  the date of this Agreement until the Title
Claim Date with a Title Defect Notice if any officer of Purchaser or its
Affiliates discover or learn of any Title Defect during such two (2) week
period.  Each Title Defect Notice shall
be in writing and shall include (i) a description of the alleged Title
Defect(s), (ii) the Units, Warranty Wells or other Assets in Exhibit A-1 affected by the Title Defect
(each a “Title Defect Property”), (iii) the Allocated Value of each Title
Defect Property, (iv) supporting documents reasonably necessary for Seller (as
well as any title attorney or examiner hired by Seller) to verify the existence
of the alleged Title Defect(s), and (v) the amount by which Purchaser
reasonably believes the Allocated Value of each Title Defect Property is
reduced by the alleged Title Defect(s) and the computations and information
upon which Purchaser’s belief is based. Notwithstanding any other provision of
this Agreement to the contrary, but subject to Purchaser’s rights in connection
with the special warranty of title referenced in Section 3.1(b), Purchaser shall be deemed to have waived its
right to assert Title Defects of which Seller has not been given notice on or
before the Title Claim Date.  For
purposes hereof, the “Allocated Value” of an Asset shall mean the portion of
the Purchase Price that has been allocated to a particular Unit, Warranty Well
or other Asset in Exhibit A-1.


(b)           Seller
shall have the right, but not the obligation, to deliver to Purchaser on or
before the Title Claim Date, with respect to each Title Benefit, a notice (a “Title
Benefit Notice”) including (i) a description of the Title Benefit, (ii) the
Units, Warranty Wells or other Assets in Exhibit
A-1 affected, (iii) the Allocated Values of the Units, Warranty
Wells or other Assets in Exhibit A-1
subject to such Title Benefit and (iv) the amount by which Seller reasonably
believes the Allocated Value of those Units, Warranty Wells or other Assets is
increased by the Title Benefit, and the computations and information upon which
Seller’s belief is based. Seller 



 11
 









shall be deemed to have waived all Title Benefits of which it has not
given notice to Purchaser on or before the Title Claim Date.


(c)           Seller
shall have the right, but not the obligation, to attempt, at its sole cost, to
cure or remove at any time prior to Closing (the “Cure Period”), unless the
parties otherwise agree, any Title Defects of which it has been advised in
writing by Purchaser.


(d)           Remedies
for Title Defects.


In the event that any Title Defect is not waived by Purchaser or cured
on or before Closing, Purchaser and Seller shall mutually elect to have one of
the following remedies apply:


(i)                                     subject
to the Individual Title Deductible and the Aggregate Defect Deductible, have
the Purchase Price reduced by an amount agreed upon (“Title Defect Amount”)
pursuant to Section 3.4(g) or Section 3.4(i) by Purchaser and Seller as
being the value of such Title Defect, taking into consideration the Allocated
Value of the Property subject to such Title Defect, the portion of the Property
subject to such Title Defect and the legal effect of such Title Defect on the
Property affected thereby; provided, however, that the methodology, terms and
conditions of Section 3.4(g) shall
control any such determination;


(ii)                                  indemnify
Purchaser against all liability, loss, cost and expense resulting from such
Title Defect pursuant to an indemnity agreement (the “Indemnity Agreement”) in
the form attached hereto as Exhibit C;
or


(iii)                               have
Seller retain the entirety of the Property that is subject to such Title
Defect, together with all associated Assets, in which event the Purchase Price
shall be reduced by an amount equal to the Allocated Value of such Property.


In the event that
Purchaser and Seller cannot mutually agree upon one of the foregoing remedies
with respect to a Title Defect asserted by Purchaser pursuant to Section 3.4(a) prior to Closing, then Seller shall, at its
sole election, select the remedy set forth in subsection (i) or (iii) above as
the remedy for such Title Defect.


(e)           With
respect to each Unit, Warranty Well or other Asset in Exhibit A-1 affected by Title Benefits
reported under Section 3.4(b),
subject to the Individual Benefit Deductible and the Aggregate Defect
Deductible, the Purchase Price shall be increased by an amount (the “Title
Benefit Amount”) equal to the increase in the Allocated Value for such Unit, Warranty
Well or other Asset in Exhibit A-1
caused by such Title Benefits, as determined pursuant to Section 3.4(h).


(f)            Section 3.4(d) shall be the exclusive right
and remedy of Purchaser with respect to Title Defects asserted by Purchaser
pursuant to Section 3.4(a).


(g)           The
Title Defect Amount resulting from a Title Defect shall be the amount by which
the Allocated Value of the Title Defect Property is reduced as a result of the
existence of such Title Defect and shall be determined in accordance with the
following methodology, terms and conditions:



 12
 









(i)                                     if
Purchaser and Seller agree on the Title Defect Amount, that amount shall be the
Title Defect Amount;


(ii)                                  if
the Title Defect is a lien, encumbrance or other charge which is undisputed and
liquidated in amount, then the Title Defect Amount shall be the amount
necessary to be paid to remove the Title Defect from the Title Defect Property;


(iii)                               if
the Title Defect represents a discrepancy between (A) the Net Revenue Interest
for any Title Defect Property and (B) the Net Revenue Interest stated on Exhibit A-1, then the Title Defect Amount
shall be the product of the Allocated Value of such Title Defect Property
multiplied by a fraction, the numerator of which is the Net Revenue Interest
decrease and the denominator of which is the Net Revenue Interest stated on Exhibit A-1;


(iv)                              if
the Title Defect represents an obligation, encumbrance, burden or charge upon
or other defect in title to the Title Defect Property of a type not described
in subsections (i), (ii) or (iii) above, the Title Defect Amount shall be
determined by taking into account the Allocated Value of the Title Defect
Property, the portion of the Title Defect Property affected by the Title
Defect, the legal effect of the Title Defect, the potential economic effect of
the Title Defect over the life of the Title Defect Property, the values placed
upon the Title Defect by Purchaser and Seller and such other factors as are
necessary to make a proper evaluation; and


(v)                                 notwithstanding
anything to the contrary in this Article 3,
the aggregate Title Defect Amounts attributable to the effects of all Title
Defects upon any Title Defect Property shall not exceed the Allocated Value of
the Title Defect Property.


(h)           The
Title Benefit Amount for any Title Benefit shall be the product of the
Allocated Value of the affected Unit, Warranty Well or other Asset in Exhibit A-1 multiplied by a fraction, the
numerator of which is the Net Revenue Interest increase and the denominator of
which is the Net Revenue Interest stated on Exhibit
A-1.


(i)            Seller
and Purchaser shall attempt in good faith to agree on all Title Defect Amounts
and Title Benefit Amounts prior to Closing. 
If Seller and Purchaser are unable to agree by Closing, the Title Defect
Amounts and Title Benefit Amounts in dispute shall be exclusively and finally
resolved by arbitration pursuant to this Section
3.4(i). There shall be a single arbitrator, who shall be a title
attorney with at least ten (10) years experience in oil and gas titles
involving properties in the regional area in which the Properties are located,
as selected by mutual agreement of Purchaser and Seller within fifteen (15)
Business Days after the end of the Cure Period, and absent such mutual
agreement, by the Houston office of the American Arbitration Association (the “Title
Arbitrator”). The arbitration proceeding shall be held in Houston, Texas and
shall be conducted in accordance with the Commercial Arbitration Rules of the
American Arbitration Association, to the extent such rules do not conflict with
the terms of this Section. The Title Arbitrator’s determination shall be made
within fifteen (15) Business Days after submission of the matters in dispute
and shall be final and binding upon both parties, without right of appeal. In
making his determination, the Title Arbitrator shall be bound by the rules set
forth in Section 3.4(g) and Section 3.4(h) and may consider such other
matters as in 



 13
 









the opinion of the Title Arbitrator are necessary or helpful to make a
proper determination. Additionally, the Title Arbitrator may consult with and
engage disinterested third parties to advise the arbitrator, including without
limitation petroleum engineers.  The
Title Arbitrator shall act as an expert for the limited purpose of determining
the specific disputed Title Defect Amounts and Title Benefit Amounts submitted
by either party and may not award damages, interest or penalties to either
party with respect to any matter. Seller and Purchaser shall each bear its own
legal fees and other costs of presenting its case.  Each party shall bear one-half of the costs
and expenses of the Title Arbitrator, including any costs incurred by the Title
Arbitrator that are attributable to such third party consultation.  Within ten (10) days after the Title Arbitrator
delivers written notice to Purchaser and Seller of his award with respect to a
Title Defect Amount or a Title Benefit Amount, (i) Purchaser shall pay to
Seller the amount, if any, so awarded by the Title Arbitrator to Seller, plus
interest payable on such amount at the Agreed Interest Rate from (but not
including) the Closing Date to (and including) the date on which such amount is
paid to Seller and (ii) Seller shall pay to Purchaser the amount, if any,
so awarded by the Title Arbitrator to Purchaser, plus interest payable on such
amount at the Agreed Interest Rate from (but not including) the Closing Date to
(and including) the date on which such amount is paid to Purchaser.


(j)            Notwithstanding
anything to the contrary, (i) in no event shall there be any adjustments to the
Purchase Price or other remedies provided by Seller for any individual uncured
Title Defect for which the Title Defect Amount therefor does not exceed $50,000
(“Individual Title Deductible”); and (ii) in no event shall there be any adjustments
to the Purchase Price or other remedies provided by Seller for uncured Title
Defects unless the aggregate Title Defect Amounts attributable to all uncured
Title Defects, taken together with the aggregate Environmental Defect Amounts
attributable to all uncured Environmental Defects, exceeds a deductible in an
amount equal to $17,000,000 (“Aggregate Defect Deductible”), after which point
adjustments to the Purchase Price or other remedies shall be made or available
to Purchaser only with respect to uncured Title Defects and uncured
Environmental Defects where the aggregate Title Defect Amounts and
Environmental Defect Amounts attributable thereto are in excess of such
Aggregate Defect Deductible.  Notwithstanding
anything to the contrary, (i) in no event shall there be any adjustments to the
Purchase Price for any individual Title Benefit for which the Title Benefit
Amount does not exceed $50,000 (“Individual Benefit Deductible”); and (ii) in
no event shall there be any adjustments to the Purchase Price for any Title
Benefit unless the aggregate Title Benefit Amounts attributable to all such
Title Benefits, exceeds a deductible in an amount equal to $17,000,000 (“Aggregate
Benefit Deductible”), after which point adjustments to the Purchase Price shall
be made only with respect to such Title Benefit Amounts in excess of such
Aggregate Benefit Deductible.


Section 3.5            Casualty
or Condemnation Loss.


(a)           From
and after the Effective Time, but subject to the provisions of Section 3.5(b) and (c) below, Purchaser shall assume all risk
of loss with respect to and any change in the condition of the Assets and for
production of Hydrocarbons through normal depletion (including but not limited
to the watering out of any Well, collapsed casing or sand infiltration of any
Well) and the depreciation of personal property due to ordinary wear and tear
with respect to the Assets.


(b)           Subject
to the provisions of Section 8.1(e)
and Section 8.2(e) hereof, if,
after the date of this Agreement but prior to the Closing Date, any portion of
the Assets is destroyed by fire or other casualty or is taken in condemnation
or under right of eminent domain, and the loss as a result of such individual
casualty or taking, taken together with all other casualty losses and 



 14
 









takings, exceeds $2,600,000,  the
transactions evidenced by this Agreement shall nevertheless be consummated and
Purchaser shall elect by written notice to Seller prior to Closing either (i)
to cause the Assets affected by any casualty or taking to be repaired or
restored to at least its condition prior to such casualty, at Seller’s sole
cost, as promptly as reasonably practicable (which work may extend after the
Closing Date), (ii) to have Seller indemnify Purchaser through a document
reasonably acceptable to Seller and Purchaser against any costs or expenses
that Purchaser reasonably incurs to repair the Assets subject to any casualty
or taking or (iii) to treat such casualty or taking as a Title Defect with
respect to the affected Property or Properties under Section 3.4; provided, however, that notwithstanding anything
herein provided to the contrary, Purchaser cannot require Seller to comply with
the remedy set forth in item (i) of this Section
3.5(b) without Seller’s prior written consent.  In each case, Seller shall retain all rights
to insurance and other claims against third parties with respect to the
casualty or taking except to the extent the parties otherwise agree in writing.


(c)           If,
after the date of this Agreement but prior to the Closing Date, any portion of
the Assets is destroyed by fire or other casualty or is taken in condemnation
or under right of eminent domain, and the loss to the Assets as a result of
such individual casualty or taking, taken together with all other casualty
losses and takings, is $2,600,000 or less, the transaction evidenced by this
Agreement shall nevertheless be consummated and Seller shall, at Closing, pay
to Purchaser all sums paid to Seller by third parties by reason of such
casualty or taking and shall assign, transfer and set over to Purchaser all of
Seller’s right, title and interest (if any) in insurance claims, unpaid awards,
and other rights against third parties (other than Affiliates of Seller and its
and their directors, officers, employees and agents) arising out of the casualty
or taking.


Section 3.6            Limitations
on Applicability.


Subject to the following sentence, the right of
Purchaser to assert a Title Defect under this Agreement shall terminate as of
the Title Claim Date, provided there shall be no termination of Purchaser’s or
Seller’s rights under Section 3.4
with respect to any bona fide Title Defect properly reported in a Title Defect
Notice or bona fide Title Benefit Claim properly reported in a Title Benefit
Notice on or before the Title Claim Date. Thereafter, Purchaser’s sole and
exclusive rights and remedies with regard to title to the Assets shall be as
set forth in, and arising under, the Conveyance transferring the Assets from
Seller to Purchaser.


Section 3.7            Government
Approvals Respecting Assets.


(a)           Federal
and State Approvals.  Purchaser
shall, within thirty (30) days after Closing and at Purchaser’s own expense,
file for approval with the applicable Governmental Bodies all assignment
documents and other state and federal transfer documents required to effectuate
the transfer of the Assets.  Purchaser
further agrees, promptly after Closing, to take all other actions reasonably
required of it by federal or state agencies having jurisdiction to obtain all
requisite regulatory approvals with respect to this transaction, and to use its
commercially reasonable efforts to obtain the approval by such federal or state
agencies, as applicable, of Seller’s assignment documents requiring federal or
state approval in order for Purchaser to be recognized by the federal or state
agencies as the owner of the Assets. 
Purchaser shall provide Seller with the resignation and designation of
operator instruments, and approved copies of the assignment documents and other
state and federal transfer documents, as soon as they are available.



 15
 









(b)           Title
Pending Governmental Approvals. 
Until all of the governmental approvals provided for in Section 3.7(a) have been obtained, the
following shall occur with respect to the affected portion of the Assets:


(i)                                     Seller
shall continue to hold record title to the affected Leases and other affected
portion of the Assets as nominee for Purchaser;


(ii)                                  Purchaser
shall be responsible for all Seller Assumed Obligations with respect to the
affected Leases and other affected portion of the Assets as if Purchaser was
the record owner of such Leases and other portion of the Assets as of the
Effective Time; and


(iii)                               Seller
shall act as Purchaser’s nominee but shall be authorized to act only upon and
in accordance with Purchaser’s instructions, and Seller shall have no
authority, responsibility or discretion to perform any tasks or functions with
respect to the affected Leases and other affected portion of the Assets other
than those which are purely administrative or ministerial in nature, unless
otherwise specifically requested and authorized by Purchaser in writing.


(c)           Denial
of Required Governmental Approvals. 
If the federal or state agency fails to do so within twenty-four (24)
months after the Closing, Seller may continue to hold record title to the
affected Leases and other affected Assets as Purchaser’s nominee or, at Seller’s
option, it may terminate this Agreement and all its obligations hereunder as to
the affected Leases and other affected portion of the Assets by giving sixty
(60) days written notice to Purchaser. 
Upon such termination:  (i) this
Agreement shall be null and void and terminated as to the affected Leases and
other affected portion of the Assets, (ii) Purchaser shall promptly reassign
and return to Seller the assignment documents and any and all other documents,
materials and data previously delivered to Purchaser with respect to the
affected  Leases and other affected
portion of the Assets, and (iii) Seller shall pay to Purchaser the Allocated
Value of the affected Property (without interest), less the proceeds of
Hydrocarbon production received by Purchaser (which Purchaser may retain as its
sole property) net of all expenses, overhead, royalties, and costs of
operations (including plugging and abandonment expenses but excluding mortgage
interest and any burdens, liens, or encumbrances created by Purchaser which
must be released prior to this payment) attributable to the affected Leases or
other affected portion of the Assets from the Effective Time forward, plus
interest payable on such net amount at the Agreed Interest Rate from (but not
including) the Closing Date to (and including) the date on which such amount is
paid to Purchaser.  In no event, however,
shall Seller ever be required to reimburse Purchaser for any expenditures
associated with workovers, recompletions, sidetracks, or the drilling,
completion or plugging and abandonment of wells drilled or work performed by
Seller or any of its Affiliates.


ARTICLE 4

ENVIRONMENTAL MATTERS


Section 4.1            Assessment.


From and after the date of execution of this Agreement
until the Closing Date, Seller shall afford to Purchaser and its officers,
employees, agents and authorized representatives reasonable access to the
Assets, including the Records in accordance with Section 7.1.  During such period, Seller shall also make
available to Purchaser, upon reasonable notice during 



 16
 









normal business hours,
Seller’s personnel knowledgeable with respect to the Assets in order that
Purchaser may make such diligent investigation as Purchaser considers
desirable.  Upon notice to Seller,
Purchaser shall have the right to conduct an environmental assessment of all or
any portion of the Properties (the “Assessment”), to be conducted by a
reputable environmental consulting or engineering firm approved in advance in
writing by Seller (such approval not to be unreasonably withheld), but only to
the extent that Seller may grant such right without violating any obligations
to any third party (provided that Seller shall use its commercially reasonable
efforts to obtain any necessary third party consents to any Assessment to be
conducted by Purchaser).  The Assessment
shall be conducted at the sole cost and expense of Purchaser, and shall be
subject to the indemnity provisions of Section 4.4.  Prior to conducting any sampling, boring,
drilling or other invasive investigative activity with respect to the
Properties (“Invasive Activity”), Purchaser shall furnish for Seller’s review a
proposed scope of such Invasive Activity, including a description of the
activities to be conducted and a description of the approximate locations of
such activities.  If any of the proposed
activities may unreasonably interfere with normal operation of the Properties,
Seller may request an appropriate modification of the proposed Invasive
Activity.  Seller shall have the right to
be present during any Assessment of the Properties and shall have the right, at
its option and expense, to split samples with Purchaser.  After completing any Assessment of the
Properties, Purchaser shall, at its sole cost and expense, restore the
Properties to their condition prior to the commencement of such Assessment,
unless Seller requests otherwise, and shall promptly dispose of all drill
cuttings, corings, or other investigative-derived wastes generated in the
course of the Assessment.  Purchaser
shall maintain, and shall cause its officers, employees, representatives,
consultants and advisors to maintain, all information obtained by Purchaser
pursuant to any Assessment or other due diligence activity as strictly
confidential until the Closing occurs, unless disclosure of any facts
discovered through such Assessment is required under any Laws.  Purchaser shall provide Seller with a copy of
the final draft of all environmental reports prepared by, or on behalf of,
Purchaser with respect to any Assessment or Invasive Activity conducted on the
Properties.  In the event that any
necessary disclosures under applicable Laws are required with respect to
matters discovered by any Assessment conducted by, for or on behalf of
Purchaser, Purchaser agrees that Seller shall be the responsible party for
disclosing such matters to the appropriate Governmental Bodies; provided that,
if Seller fails to promptly make such disclosure and Purchaser or any of its
Affiliates is legally obligated to make such disclosure, such Person shall have
the right to fully comply with such legal obligation.


Section 4.2            NORM,
Wastes and Other Substances.


Purchaser acknowledges that the Assets have been used
for the exploration, development, and production of Hydrocarbons and that there
may be petroleum, produced water, wastes, or other substances or materials
located in, on or under the Properties or associated with the Assets.  Equipment and sites included in the Assets
may contain Hazardous Materials, including NORM.  NORM may affix or attach itself to the inside
of wells, materials, and equipment as scale, or in other forms.  The wells, materials, and equipment located
on the Properties or included in the Assets may contain Hazardous Materials,
including NORM.  Hazardous Materials,
including NORM, may have come in contact with various environmental media,
including without limitation, water, soils or sediment.  Special procedures may be required for the
assessment, remediation, removal, transportation, or disposal of environmental
media and Hazardous Materials, including NORM, from the Assets.



 17
 









Section 4.3            Environmental
Defects.


If, as a result of its investigation pursuant to Section 4.1, Purchaser determines that with respect to the
Assets, there exists a violation of an Environmental Law (other than with
respect to NORM) (in each case, an “Environmental Defect”), then on or prior to
April 17, 2007 (the “Environmental Claim Date”), Purchaser may notify Seller in
writing of such Environmental Defect (an “Environmental Defect Notice”).  For all purposes of this Agreement, Purchaser
shall be deemed to have waived any Environmental Defect which Purchaser fails
to assert as an Environmental Defect by an Environmental Defect Notice received
by Seller on or before the Environmental Claim Date.  To be effective, each such notice shall set
forth (i) a description of the matter constituting the alleged Environmental
Defect, (ii) the Units/Warranty Wells and associated Assets affected by the
Environmental Defect, (iii) the estimated Lowest Cost Response to eliminate the
Environmental Defect in question (the “Environmental Defect Amount”), and (iv)
supporting documents reasonably necessary for Seller to verify the existence of
the alleged Environmental Defect and the Environmental Defect Amount.  Commencing on February 15, 2007, Purchaser
shall furnish Seller once every two (2) weeks until the Environmental Claim
Date with an Environmental Defect Notice if any officer of Purchaser or its
Affiliates discover or become aware of an Environmental Defect during such two
(2) week period.  Seller shall have the
right, but not the obligation, to cure any Environmental Defect before Closing
or, provided that the parties shall have agreed to the general plan of
remediation with respect to such Environmental Defect and the time period by
which such remediation shall take place, after Closing.  If Seller disagrees with any of Purchaser’s
assertions with respect to the existence of an Environmental Defect or the
Environmental Defect Amount, Purchaser and Seller will attempt to resolve the
dispute prior to Closing.  If the dispute
cannot be resolved within ten (10) days of the first meeting of Purchaser and
Seller, either party may submit the dispute to an environmental consultant
approved in writing by Seller and Purchaser that is experienced in
environmental corrective action at oil and gas properties in the relevant
jurisdiction and that shall not have performed professional services for either
party or any of their respective Affiliates during the previous five years (the
“Independent Expert”).  The Independent
Expert may elect to conduct the dispute resolution proceeding by written
submissions from Purchaser and Seller with exhibits, including interrogatories,
supplemented with appearances by Purchaser and Seller, if necessary, as the
Independent Expert may deem necessary. 
After the parties and Independent Expert have had the opportunity to
review all such submissions, the Independent Expert shall call for a final,
written offer of resolution from each party. 
The Independent Expert shall render its decision within twenty (20)
Business Days of receiving such offers by selecting one or the other of the
offers. The Independent Expert may not award damages, interest or penalties to
either party with respect to any matter. 
The decision of the Independent Expert shall be final and binding upon
both parties, without right of appeal. 
Seller and Purchaser shall each bear its own legal fees and other costs
of presenting its case to the Independent Expert. Each party shall bear
one-half of the costs and expenses of the Independent Expert.  The parties shall adjust the Purchase Price
to reflect the Environmental Defect Amounts, as agreed by the parties or as
determined by the Independent Expert, for all uncured Environmental Defects;
provided, that notwithstanding anything to the contrary, (a) in no event shall
there be any adjustments to the Purchase Price for any individual uncured
Environmental Defect for which the Environmental Defect Amount therefor does
not exceed $100,000 (“Individual Environmental Deductible”); and (b) in no
event shall there be any adjustments to the Purchase Price for any uncured Environmental
Defect unless the aggregate Environmental Defect Amount attributable to all
such Environmental Defects, taken together with the aggregate Title Defect
Amounts attributable to all uncured Title Defects, exceeds the Aggregate Defect
Deductible, after which point Purchaser shall be entitled to adjustments to the
Purchase Price or other remedies only with respect to uncured Title Defects and
uncured 



 18
 









Environmental Defects
where the aggregate Title Defect Amounts and Environmental Defect Amounts
attributable thereto are in excess of such Aggregate Defect Deductible.  To the extent the Independent Expert fails to
determine any disputed Environmental Defect Amounts prior to Closing, then,
within ten (10) days after the Independent Expert delivers written notice to
Purchaser and Seller of his award with respect to an Environmental Defect
Amount, Seller shall pay to Purchaser the amount, if any, so awarded by the
Independent Examiner, plus interest payable on such amount at the Agreed
Interest Rate from (but not including) the Closing Date to (and including) the
date on which such amount is paid to Purchaser.


Section 4.4            Inspection
Indemnity.


PURCHASER HEREBY AGREES TO
DEFEND, INDEMNIFY, RELEASE, PROTECT, SAVE AND HOLD HARMLESS THE SELLER
INDEMNIFIED PERSONS FROM AND AGAINST ANY AND ALL LOSSES ARISING OUT OF OR
RELATING TO ANY DUE DILIGENCE ACTIVITY CONDUCTED BY PURCHASER OR ITS AGENTS,
WHETHER BEFORE OR AFTER THE EXECUTION OF THIS AGREEMENT, REGARDLESS OF FAULT.  The
indemnity obligation set forth in this Section 4.4
shall survive the Closing or termination of this Agreement.


ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF SELLER


Section 5.1            Generally.


(a)           Any
representation or warranty qualified “to the knowledge of Seller” or “to Seller’s
knowledge” or with any similar knowledge qualification is limited to matters
within the actual knowledge of the officers of Seller or its Affiliates or
those employees of Seller or any of its Affiliates who have responsibility for
the Assets and who have the following titles: 
General Manager and Production Engineering Manager.  “Actual knowledge” for purposes of this
Agreement means information actually personally known by such Persons.


(b)           Inclusion
of a matter on a Schedule in relation to a representation or warranty which
addresses matters having a Material Adverse Effect shall not be deemed an
indication that such matter does, or may, have a Material Adverse Effect.
Likewise, the inclusion of a matter on a Schedule in relation to a
representation or warranty shall not be deemed an indication that such matter
necessarily would, or may, breach such representation or warranty absent its
inclusion on such Schedule. Matters may be disclosed on a Schedule to this
Agreement for purposes of information only.


(c)           Subject
to the foregoing provisions of this Section
5.1, the disclaimers and waivers contained in Sections 11.10, 11.11 and 11.12
and the other terms and conditions of this Agreement, Seller represents and
warrants to Purchaser the matters set out in the remainder of this Article 5.


Section 5.2            Existence
and Qualification.


Each of APC and Howell is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is duly qualified to do business as a foreign corporation where
the Assets owned by it are located, except where the failure to so qualify
would not have a Material Adverse Effect. 
Each of AEP and KMOG is a limited partnership duly formed, validly
existing and in good standing under the laws of the State of 



 19
 









Delaware and is duly
qualified to do business as a foreign limited partnership where the Assets
owned by it are located, except where the failure to so qualify would not have
a Material Adverse Effect.


Section 5.3            Power.


Seller has the corporate or partnership power to enter
into and perform this Agreement and consummate the transactions contemplated by
this Agreement.


Section 5.4            Authorization
and Enforceability.


The execution, delivery and performance of this
Agreement, and the performance of the transactions contemplated hereby, have
been duly and validly authorized by all necessary corporate or partnership
action on the part of Seller. This Agreement has been duly executed and
delivered by Seller (and all documents required hereunder to be executed and
delivered by Seller at Closing will be duly executed and delivered by Seller)
and this Agreement constitutes, and at the Closing such documents will
constitute, the valid and binding obligations of Seller, enforceable against
Seller in accordance with their terms except as such enforceability may be
limited by applicable bankruptcy or other similar laws affecting the rights and
remedies of creditors generally as well as to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at Law).


Section 5.5            No
Conflicts.


Subject to compliance with the Preference Rights and
Transfer Requirements set forth in Schedule 5.13 and
the HSR Act, the execution, delivery and performance of this Agreement by
Seller, and the transactions contemplated by this Agreement will not (i)
violate any provision of the certificate of incorporation, bylaws, limited
partnership agreement or similar governing documents of Seller, (ii) result in
default (with due notice or lapse of time or both) or the creation of any lien
or encumbrance or give rise to any right of termination, cancellation or
acceleration under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license or agreement to which Seller is a party or
which affect the Assets, (iii) violate any judgment, order, ruling, or decree
applicable to Seller as a party in interest, (iv) violate any Laws applicable
to Seller or any of the Assets, except for (a) rights to consent by, required
notices to, filings with, approval or authorizations of, or other actions by
any Governmental Body where the same are not required prior to the assignment
of the related Asset or they are customarily obtained subsequent to the sale or
conveyance thereof and (b) any matters described in clauses (ii), (iii) or (iv)
above which would not have a Material Adverse Effect.


Section 5.6            Liability
for Brokers’ Fees.


Purchaser shall not directly or indirectly have any
responsibility, liability or expense, as a result of undertakings or agreements
of Seller or its Affiliates, for brokerage fees, finder’s fees, agent’s commissions
or other similar forms of compensation in connection with this Agreement or any
agreement or transaction contemplated hereby.


Section 5.7            Litigation.


With respect to the Assets and Seller’s or any of its
Affiliates’ ownership, operation, development, maintenance, or use of any of
the Assets, except as set forth in: (i) Schedule 5.7(a),
no proceeding, arbitration, action, suit, pending settlement, or other legal
proceeding of


 



 20















any kind or nature before
or by any Governmental Body (each, a “Proceeding,” and collectively “Proceedings”)
(including any take-or-pay claims) to which Seller or any of its Affiliates is
a party and which relates to the Assets is pending or, to Seller’s knowledge,
threatened against Seller or any of its Affiliates; (ii) Schedule 5.7(a), to Seller’s knowledge, no Proceeding or
investigation to which Seller is not a party which relates to the Assets is
pending or threatened; and (iii) Schedule 5.7(b),
no notice in writing from any third party (including any Governmental Body) has
been received by Seller or any of its Affiliates threatening any Proceeding
relating to the Assets which could have a Material Adverse Effect (excluding
any notices relating to any Environmental Liabilities or Environmental Law).


Section 5.8            Taxes
and Assessments.


(a)           With
respect to all Taxes related to the Assets, except as set forth on Schedule 5.8, (i) all reports, returns,
statements (including estimated reports, returns or statements), and other
similar filings (the “Tax Returns”) relating to the Assets required to be filed
by Seller with respect to such Taxes have been timely filed with the
appropriate Governmental Body in all jurisdictions in which such Tax Returns
are required to be filed; and (ii) such Tax Returns are true and correct in all
material respects, and (iii) all Taxes due with respect to such Tax Returns
have been paid, except those being contested in good faith.


(b)           With
respect to all Taxes related to the Assets, except as set forth on Schedule 5.8, (i) there are not currently
in effect any extensions or waivers of any statute of limitations of any
jurisdiction regarding the assessment or collection of any such Tax; (ii) there
are no Proceedings against the Assets or Seller by any Governmental Body; and
(iii) there are no Tax liens on any of the Assets except for liens for Taxes
not yet due.


Section 5.9            Compliance
with Laws.


Except as disclosed on Schedule 5.9,
the Assets are, and the ownership, operation, development, maintenance, and use
of any of the Assets are, in compliance with the provisions and requirements of
all Laws of all Governmental Bodies having jurisdiction with respect to the
Assets, or the ownership, operation, development, maintenance, or use of any of
the Assets, except where the failure to so comply would not have a Material
Adverse Effect.  Notwithstanding the
foregoing, Seller makes no representation or warranty, express or implied,
under this Section 5.9 relating to any
Environmental Liabilities or Environmental Law.


Section 5.10          Contracts.


Except as disclosed on Schedule
5.10, to the knowledge of Seller, Seller has paid its share of all
costs (including all Property Costs) payable by it under the contracts and
agreements described in Schedule 1.2(d),
or otherwise included in the Contracts. 
Seller is in compliance and, to Seller’s knowledge, all counterparties
are in compliance under all Contracts, except as disclosed on Schedule 5.10 and except for such non-compliance as would
not, individually or the aggregate, have a Material Adverse Effect.


Section 5.11          Payments
for Hydrocarbon Production.


Except as set forth on Schedule
5.11, (a) to the knowledge of Seller, all rentals, royalties, excess
royalty, overriding royalty interests, Hydrocarbon production payments, and
other payments due and payable by Seller to overriding royalty holders and
other interest owners under or with respect to the Assets and the Hydrocarbons
produced therefrom or 



 21
 









attributable thereto,
have been paid, and (b) Seller is not obligated under any contract or agreement
for the sale of gas from the Assets containing a take-or-pay, advance payment,
prepayment, or similar provision, or under any gathering, transmission, or any
other contract or agreement with respect to any of the Assets to gather,
deliver, process, or transport any gas 
without then or thereafter receiving full payment therefor.


Section 5.12          Governmental
Authorizations.


To Seller’s knowledge, except as disclosed on Schedule 5.12, Seller has obtained and is maintaining all
material federal, state and local governmental licenses, permits, franchises,
orders, exemptions, variances, waivers, authorizations, certificates, consents,
rights, privileges and applications therefor (the “Governmental Authorizations”)
that are presently necessary or required for the ownership and operation of the
Seller Operated Assets as currently owned and operated (excluding Governmental
Authorizations required by Environmental Law). To Seller’s knowledge, except as
disclosed in Schedule 5.7(a), Schedule 5.7(b) or Schedule 5.12,
(i) Seller has operated the Seller Operated Assets in all material respects in
accordance with the conditions and provisions of such Governmental
Authorizations, and (ii) no written notices of material violation have been
received by Seller, and no Proceedings are pending or, to Seller’s knowledge,
threatened in writing that might result in any material modification,
revocation, termination or suspension of any such Governmental Authorizations
or which would require any material corrective or remediation action by Seller.


Section 5.13          Preference
Rights and Transfer Requirements.


To the knowledge of Seller, Schedule
5.13 sets forth all Preference Rights and Transfer Requirements
contained in easements, rights-of-way or equipment leases included in the
Assets. None of the other Assets, or any portion thereof, is subject to any
Preference Right or Transfer Requirement which may be applicable to the
transactions contemplated by this Agreement, except for Preference Rights and
Transfer Requirements as are set forth on Schedule 5.13.


Section 5.14          Payout
Balances.


To Seller’s knowledge, Schedule
5.14 contains a complete and accurate list of the status of any “payout”
balance, as of the respective dates set forth therein, for the Wells and Units
listed on Exhibit A-1 subject to a reversion or
other adjustment at some level of cost recovery or payout (or passage of time
or other event other than termination of a Lease by its terms).


Section 5.15          Outstanding
Capital Commitments.


As of the date hereof, there are no outstanding AFEs
or other commitments to make capital expenditures which are binding on the
Assets and which Seller reasonably anticipates will individually require
expenditures by the owner of the Assets after the Effective Time in excess of
$250,000  other than those shown on Schedule 5.15.


Section 5.16          Imbalances.


To Seller’s knowledge, Schedule
5.16 accurately sets forth in all material respects all of Seller’s
Imbalances as of the respective dates set forth therein, arising with respect
to the Assets and, except as disclosed in Schedule 5.16,
(i) no Person is entitled to receive any 



 22
 









material portion of
Seller’s Hydrocarbons produced from the Assets or to receive material cash or
other payments to “balance” any disproportionate allocation of Hydrocarbons
produced from the Assets under any operating agreement, gas balancing or
storage agreement, gas processing or dehydration agreement, gas transportation
agreement, gas purchase agreement, or other agreements, whether similar or
dissimilar, (ii) Seller is not obligated to deliver any material quantities of
gas or to pay any material penalties or other material amounts, in connection
with the violation of any of the terms of any gas contract or other agreement
with shippers with respect to the Assets, and (iii) Seller is not obligated to
pay any material penalties or other material payments under any gas
transportation or other agreement as a result of the delivery of quantities of
gas from the Wells in excess of the contract requirements.  Except as set forth on Schedule
5.16, Seller has not received, or is not obligated to receive,
prepayments (including payments for gas not taken pursuant to “take or pay”
arrangements) for any of Seller’s share of the Hydrocarbons produced from the
Properties, as a result of which the obligation exists to deliver Hydrocarbons
produced from the Properties after the Effective Time without then or
thereafter receiving payment therefor.


Section 5.17          Condemnation.


To Seller’s knowledge, there is no actual or
threatened taking (whether permanent, temporary, whole or partial) of any part
of the Properties by reason of condemnation or the threat of condemnation.


Section 5.18          Bankruptcy.


There are no bankruptcy, reorganization, or
receivership proceedings pending against, or, to Seller’s knowledge, being
contemplated by or threatened against Seller.


Section 5.19          PUHCA/NGA.


Seller is not a “holding company,” or a “subsidiary
company” of a “holding company,” or an “affiliate” of a “holding company,” or
an “affiliate” of a “subsidiary” of a “holding company,” or a “public-utility
company” within the meaning of the Public Utility Holding Company Act of 2005,
as amended. No consent is required in connection with the transaction
contemplated hereby under the Natural Gas Policy Act of 1978, as amended (“NGPA”).
Seller is not a natural gas company within the meaning of the Natural Gas Act
of 1938 (“NGA”), and neither Seller nor any of its Affiliates has operated any
of the Assets in a manner that would subject Seller or any of its Affiliates to
the jurisdiction of, or invoke regulation by, the Federal Energy Regulatory
Commission under the NGPA or the NGA with respect to the Assets.


Section 5.20          Investment
Company.


Seller is not an investment company or a company
controlled by an investment company within the meaning of the Investment
Company Act of 1940, as amended.


Section 5.21          Production
Allowables.


To Seller’s knowledge, Seller has not received written
notice that there has been any change proposed in the production allowables for
any Wells listed on Exhibit A-1.



 23
 









Section 5.22          Plugging
and Abandonment.


To Seller’s knowledge, since the Effective Time
through the date of this Agreement, Seller has not abandoned, and is not in the
process of abandoning, any Wells (nor has it removed, nor is it in the process
of removing, any material items of Personal Property, except those replaced by
items of substantially equivalent suitability and value).  Except as set forth in Schedule
5.22 or as otherwise would not have a Material Adverse Effect, there
are no Wells located on the Leases or the Lands that:


(a)           Seller
has received an order from any Governmental Body requiring that such Well be
plugged and abandoned;


(b)           formerly
produced but that are currently shut in or temporarily abandoned; and


(c)           have
been plugged and abandoned but have not been plugged in accordance with all
applicable requirements of each Governmental Body having jurisdiction over the
Properties.


Section 5.23          Foreign
Person.


Seller is not a “foreign person” within the meaning of
Section 1445 of the Code.


Section 5.24          Collective
Bargaining Agreements.


Neither Seller or any of its Affiliates has agreed to
recognize any labor union or other collective bargaining representative of, nor
has any labor union or other collective bargaining representative been
certified as the exclusive bargaining representative of, any individual
employed or otherwise engaged by Seller (or an Affiliate thereof) who is
primarily involved in the business associated with the Assets.


ARTICLE 6

REPRESENTATIONS AND WARRANTIES OF PURCHASER


Purchaser represents and warrants to Seller the
following:


Section 6.1            Existence
and Qualification.


Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation;
and Purchaser is duly qualified to do business as a foreign corporation in
every jurisdiction in which it is required to qualify in order to conduct its
business, except where the failure to so qualify would not have a material
adverse effect on Purchaser; and Purchaser is or will be as of Closing duly
qualified to do business as a foreign corporation in the respective
jurisdictions where the Assets are located.


Section 6.2            Power.


Purchaser has the corporate power to enter into and
perform this Agreement and consummate the transactions contemplated by this
Agreement.



 24
 









Section 6.3            Authorization
and Enforceability.


The execution, delivery and performance of this
Agreement, and the performance of the transaction contemplated hereby, have
been duly and validly authorized by all necessary corporate action on the part
of Purchaser. This Agreement has been duly executed and delivered by Purchaser
(and all documents required hereunder to be executed and delivered by Purchaser
at Closing will be duly executed and delivered by Purchaser) and this Agreement
constitutes, and at the Closing such documents will constitute, the valid and
binding obligations of Purchaser, enforceable against Purchaser in accordance
with their terms except as such enforceability may be limited by applicable
bankruptcy or other similar laws affecting the rights and remedies of creditors
generally as well as to general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law).


Section 6.4            No
Conflicts.


Subject to compliance with the HSR Act, the execution,
delivery and performance of this Agreement by Purchaser, and the  transactions contemplated by this Agreement
will not (i) violate any provision of the organizational documents of
Purchaser, (ii) result in a default (with due notice or lapse of time or both)
or the creation of any lien or encumbrance or give rise to any right of
termination, cancellation or acceleration under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license or agreement to
which Purchaser is a party, (iii) violate any judgment, order, ruling, or
regulation applicable to Purchaser as a party in interest, or (iv) violate any
Law applicable to Purchaser or any of its assets, or (v) require any filing
with, notification of or consent, approval or authorization of any Governmental
Body or authority, except any matters described in clauses (ii), (iii), (iv) or
(v) above which would not have a material adverse effect on Purchaser or the
transactions contemplated hereby.


Section 6.5            Liability
for Brokers’ Fees.


Seller shall not directly or indirectly have any
responsibility, liability or expense, as a result of undertakings or agreements
of Purchaser or its Affiliates, for brokerage fees, finder’s fees, agent’s
commissions or other similar forms of compensation in connection with this
Agreement or any agreement or transaction contemplated hereby.


Section 6.6            Litigation.


There are no Proceedings pending, or to the actual
knowledge of Purchaser, threatened in writing before any Governmental Body
against Purchaser or any Affiliate of Purchaser which are reasonably likely to
impair materially Purchaser’s ability to perform its obligations under this
Agreement.


Section 6.7            Financing.


At Closing, Purchaser will have sufficient sources of
immediately available funds (in United States dollars) to enable it to pay the
Closing Payment to Seller at the Closing and to otherwise satisfy its
obligations under this Agreement.



 25
 









Section 6.8            Limitation.


Except for the representations and warranties
expressly made by Seller in Article 5 of
this Agreement, in the Conveyance or confirmed in any certificate furnished or
to be furnished to Purchaser pursuant to this Agreement, Purchaser represents
and acknowledges that (i) there are no representations or warranties, express,
statutory or implied, as to the Assets or prospects thereof, and (ii) Purchaser
has not relied upon any oral or written information provided by Seller.  Without limiting the generality of the
foregoing, subject to Section 5.7,
Purchaser represents and acknowledges that Seller has made and will make no
representation or warranty regarding any matter or circumstance relating to
Environmental Laws, Environmental Liabilities, the release of materials into
the environment or protection of human health, safety, natural resources or the
environment or any other environmental condition of the Assets.  Purchaser further represents and acknowledges
that it is knowledgeable of the oil and gas business and of the usual and
customary practices of producers such as Seller and that it has had access to
the Assets, the officers and employees of Seller, and the books, records and
files made available by Seller relating to the Assets, and in making the
decision to enter into this Agreement and consummate the transactions
contemplated hereby, Purchaser has relied solely on the basis of its own
independent due diligence investigation of the Assets and Seller’s
representations and warranties contained in this Agreement.


Section 6.9            SEC
Disclosure.


Purchaser is acquiring the Assets for its own account
for use in its trade or business, and not with a view toward or for sale
associated with any distribution thereof, nor with any present intention of
making a distribution thereof within the meaning of the Securities Act of 1933,
as amended, and applicable state securities laws.


Section 6.10          Bankruptcy.


There are no bankruptcy, reorganization or
receivership proceedings pending against, or, to the knowledge of Purchaser,
being contemplated by, or threatened against Purchaser.


Section 6.11          Qualification.


As of Closing, Purchaser will be qualified to own and
assume operatorship of federal and state oil, gas and mineral leases in all
jurisdictions where the Assets to be transferred to it are located, and the
consummation of the transactions contemplated in this Agreement will not cause
Purchaser to be disqualified as such an owner or operator.  To the extent required by the applicable Law,
as of the Closing, Purchaser will have lease bonds, area-wide bonds or any
other surety bonds as may be required by, and in accordance with, such state or
federal regulations governing the ownership and operation of the Assets.


ARTICLE 7

COVENANTS OF THE PARTIES


Section 7.1            Access.


(a)           From the date of this Agreement until the Closing, Seller
shall cooperate with Purchaser and provide Purchaser and its representatives,
consultants and advisors, reasonable access to the Assets and access to the
Records, but only to the extent that Seller may do so without violating any
obligations to any third party and to the extent that Seller has authority to
grant such access without breaching any restriction legally binding on
Seller.  Purchaser shall conduct all such
inspections and other information gathering described above only (i) (x) during




 26
 









regular business hours and (y) during any
weekends and after hours requested by Purchaser that can be reasonably
accommodated by Seller, and (ii) in a manner which will not unduly interfere
with Seller’s operation of the Assets. 
All information obtained by Purchaser and its representatives pursuant
to this Section 7.1 shall be subject to the terms of that certain
confidentiality agreement dated December 7, 2006 (the “Confidentiality
Agreement”), by and between APC and Purchaser.


(b)           Seller
shall use its commercially reasonable efforts to prepare, at the sole cost and
expense of Purchaser, either (i) if relief is granted by the U.S. Securities
and Exchange Commission, statements of revenues and direct operating expenses
and all notes thereto related to the Assets or (ii) if such relief is not
granted by the U.S. Securities and Exchange Commission, the financial
statements required by the U.S. Securities and Exchange Commission (such
financial statements set forth in the foregoing clauses (i) and (ii), as
applicable, the “Statements of Revenues and Expenses”) in each case of clauses
(i) and (ii), that will be required of Purchaser or any of its Affiliates in
connection with reports, registration statements and other filings to be made
by Purchaser or any of its Affiliates related to the transactions contemplated
by this Agreement with the U.S. Securities and Exchange Commission pursuant to
the Securities Act, or the Exchange Act, in such form that such statements and
the notes thereto can be audited.  Seller
(x) shall cooperate with and permit Purchaser to reasonably participate in the
preparation of the Statements of Revenues and Expenses and (y) shall provide Purchaser
and its representatives with reasonable access to the personnel of Seller and
its Affiliates who engage in the preparation of the Statements of Revenues and
Expenses.


(c)           Promptly
after the date of this Agreement, Seller shall engage KPMG, LLP to perform an
audit of the Statements of Revenues and Expenses and shall use commercially
reasonable efforts to cause KPMG, LLP to issue unqualified opinions with
respect to Statements of Revenues and Expenses (the Statements of Revenues and
Expenses and related audit opinions being hereinafter referred to as the “Audited
Financial Statements”) and provide its written consent for the use of its audit
reports with respect to Statements of Revenues and Expenses in reports filed by
Purchaser or any of its Affiliates under the Exchange Act or the Securities
Act, as needed.  Purchaser shall
reimburse Seller for all fees charged by KPMG, LLP pursuant to such
engagement.  Seller shall take all action
as may be necessary to facilitate the completion of such audit and delivery of
the Audited Financial Statements to Purchaser or any of its Affiliates as soon
as reasonably practicable, but no later than ten (10) days prior to the date
that such Audited Financial Statements would be required to be filed by
Purchaser or any of its Affiliates with a report on Form 8-K or an amendment
thereto under the Exchange Act.  Seller
shall provide to Purchaser a draft of the Audited Financial Statements no later
than fifteen (15) days prior to the date that such Audited Financial Statements
would be required to be filed by Purchaser or any of its Affiliates with a
report on Form 8-K or an amendment thereto under the Exchange Act.  Seller shall keep Purchaser regularly
informed regarding the progress of such audit and also shall periodically
provide Purchaser with copies of drafts of the Audited Financial Statements and
related audit opinions.


Section 7.2            Government
Reviews.


(a)           Other
than with respect to filings, negotiations and applications with respect to the
HSR Act, which are addressed in Section
7.2(b), Seller and Purchaser shall in a timely manner (a) make all
required filings, if any, with and prepare applications to and conduct
negotiations with, each Governmental Body as to which such filings,
applications or negotiations are necessary or appropriate in the consummation
of the transactions contemplated hereby and 



 27
 









(b) provide such information as each may reasonably request to make
such filings, prepare such applications and conduct such negotiations.  Each party shall cooperate with and use all
commercially reasonable efforts to assist the other with respect to such
filings, applications and negotiations.


(b)           As
promptly as practicable, and in any event not more than thirty (30) days
following the date of this Agreement, Seller and Purchaser will file with the
Federal Trade Commission and the Department of Justice, as applicable, the
required notification and report forms and will as promptly as practicable
furnish any supplemental information which may be requested in connection
therewith.  Seller and Purchaser will request
expedited treatment (i.e., early termination) of such filing.  Seller and Purchaser shall use commercially
reasonable efforts to make all other filings and submissions on a prompt and
timely basis in connection with the filings required by this Section 7.2(b) and cooperate with each
other and use all commercially reasonable efforts to assist the other with
respect to such filings, applications and negotiations.  All filing fees incurred in connection with
the filings made pursuant to this Section 7.2
shall be borne fifty (50) percent by Seller and fifty (50) percent by
Purchaser.


Section 7.3            Notification
of Breaches.


Until the Closing,


(a)           Purchaser
shall notify Seller promptly after Purchaser obtains actual knowledge that any
representation or warranty of Seller, as applicable, contained in this
Agreement is untrue in any material respect or will be untrue in any material
respect as of the Closing Date, or that any covenant or agreement to be
performed or observed by Seller prior to or on the Closing Date has not been so
performed or observed in any material respect.


(b)           Seller
shall notify Purchaser promptly after Seller obtains actual knowledge that any
representation or warranty of Purchaser contained in this Agreement is untrue
in any material respect or will be untrue in any material respect as of the
Closing Date, or that any covenant or agreement to be performed or observed by
Purchaser prior to or on the Closing Date has not been so performed or observed
in any material respect.


(c)           If
any of Purchaser’s or Seller’s representations or warranties is untrue or shall
become untrue in any material respect between the date of execution of this
Agreement and the Closing Date, or if any of Purchaser’s or Seller’s covenants
or agreements to be performed or observed prior to or on the Closing Date shall
not have been so performed or observed in any material respect, but if such
breach of representation, warranty, covenant or agreement shall (if curable) be
cured by the Closing, then such breach shall be considered not to have occurred
for all purposes of this Agreement.  No
such notification shall affect the representations or warranties of the parties
or the conditions to their respective obligations hereunder.


(d)           There
shall be no breach of the covenants in this Section as a result of a party’s
failure to report a breach of any representation or warranty or a failure to
perform or observe any covenant or agreement of which it had knowledge if the
party subject to the breach or failure also had knowledge thereof prior to
Closing.



 28
 









Section 7.4            Letters-in-Lieu;
Assignments; Operatorship.


(a)           Seller
will execute on the Closing Date letters in lieu of division and transfer
orders relating to the Assets, on forms prepared by Seller and reasonably
satisfactory to Purchaser, to reflect the transaction contemplated hereby.


(b)           Seller
will prepare and execute, and Purchaser will execute, on the Closing Date, all
assignments necessary to convey to Purchaser all federal and state Leases in
the form as prescribed by the applicable Governmental Body and otherwise
acceptable to Purchaser and Seller.


(c)           Seller
makes no representations or warranties to Purchaser as to transferability or
assignability of operatorship of any Seller Operated Assets.  Rights and obligations associated with
operatorship of such Properties are governed by operating and similar
agreements covering the Properties and will be determined in accordance with
the terms of such agreements. However, Seller will assist Purchaser in
Purchaser’s efforts to succeed Seller as operator of any Wells and Units
included in the Assets.  Purchaser shall,
promptly following Closing, file all appropriate forms and declarations or
bonds with federal and state agencies relative to its assumption of
operatorship.  For all Seller Operated
Assets, Seller shall execute and deliver to Purchaser, and Purchaser shall
promptly file the appropriate forms (including a change of operator card on the
form established by the Department of Conservation, duly executed by Seller and
naming Purchaser as the successor operator) with the applicable regulatory
agency transferring operatorship of such Assets to Purchaser.


Section 7.5            Public
Announcements.


Until the Closing, neither Seller nor Purchaser shall
make any press release or other public announcement regarding the existence of
this Agreement, the contents hereof or the transactions contemplated hereby
without the prior written consent of the others; provided, however, the
foregoing shall not restrict disclosures by Purchaser or Seller which are
required by applicable securities or other laws or regulations or the
applicable rules of any stock exchange having jurisdiction over the disclosing
party or its Affiliates; and provided, further, that, Purchaser may disclose
the existence and contents of this Agreement, the transactions contemplated
hereby and information regarding the Assets to the Standard & Poor’s and
Moody’s rating agencies and any actual or potential lenders or other financing
sources of Purchaser.  At or after
Closing, the content of any press release or public announcement first
announcing the consummation of this transaction shall be subject to the prior
review and reasonable approval of Seller and Purchaser; provided, however, the
foregoing shall not restrict disclosures by Purchaser or Seller which are
required by applicable securities or other laws or regulations or the
applicable rules of any stock exchange having jurisdiction over the disclosing
party or its Affiliates.


Section 7.6            Operation
of Business.


Except as set forth on Schedule 7.6,
until the Closing, Seller (i) will operate the Assets and the business thereof
in the ordinary course, (ii) will not, without the prior written consent of
Purchaser, which consent shall not be unreasonably withheld, commit to any
operation, or series of related operations thereon, reasonably anticipated to
require future capital expenditures by Purchaser as owner of the Assets in
excess of $150,000, or make any capital expenditures in respect of the Assets
in excess of $150,000, or terminate, materially amend, execute or extend any
material Contracts affecting the Assets, (iii) will maintain insurance coverage
on the Assets presently furnished by nonaffiliated third parties in the amounts
and of the types presently in force, (iv) will use commercially reasonable
efforts to maintain in full force 



 29
 









and effect all Leases,
(v) will maintain all material governmental permits and approvals affecting the
Assets, (vi) will not transfer, farmout, sell, hypothecate, encumber or
otherwise dispose of any Assets, except for (A) sales and dispositions of
Hydrocarbon production in the ordinary course of business consistent with past
practices or (B) transfers, farmouts, hypothecations, encumbrances or other
dispositions of Assets, in one or more transactions, not exceeding $500,000 of
consideration (in any form), in the aggregate, (vii) will not enter into any
settlement or agreement with respect to Taxes, or make or change any election
with respect to Taxes, relating to the Assets and (viii) will not commit to do
any of the foregoing. Purchaser’s approval of any action restricted by this Section 7.6 shall be considered granted within ten (10) days
(unless a shorter time is reasonably required by the circumstances and such
shorter time is specified in Seller’s written notice) of Seller’s written
notice to Purchaser requesting such consent unless Purchaser notifies Seller to
the contrary in writing during that period. In the event of an emergency,
Seller may take such action as a prudent operator would take and shall notify
Purchaser of such action promptly thereafter.


Purchaser acknowledges that Seller may own an
undivided interest in certain of the Assets, and Purchaser agrees that the acts
or omissions of the other working interest owners who are not affiliated with
Seller shall not constitute a violation of the provisions of this Section 7.6 nor shall any action required by a vote of
working interest owners constitute such a violation so long as Seller has voted
its interest in a manner consistent with the provisions of this Section 7.6.


Section 7.7            Preference
Rights and Transfer Requirements.


(a)           The
transactions contemplated by this Agreement are expressly subject to all
validly existing and applicable Preference Rights and Transfer
Requirements.  Prior to the Closing Date,
Seller shall initiate all procedures which are reasonably required to comply
with or obtain the waiver of all Preference Rights and Transfer Requirements
set forth in Schedule 5.13 with
respect to the transactions contemplated by this Agreement.  Seller shall use its commercially reasonable
efforts to obtain all applicable consents and to obtain waivers of applicable
Preference Rights; provided, however, Seller shall not be obligated to pay any
consideration to (or incur any cost or expense for the benefit of) the holder
of any Preference Right or Transfer Requirement in order to obtain the waiver
thereof or compliance therewith.


(b)           If
the holder of a Preference Right elects prior to Closing to purchase the Asset
subject to a Preference Right (a “Preference Property”) in accordance with the
terms of such Preference Right, and Seller receives written notice of such
election prior to the Closing, such Preference Property will be eliminated from
the Assets and the Purchase Price shall be reduced by the Allocated Value of
the Preference Property.


(c)           If


(i)                                     a
third party brings any suit, action or other proceeding prior to the Closing
seeking to restrain, enjoin or otherwise prohibit the consummation of the
transactions contemplated hereby in connection with a claim to enforce a
Preference Right;


(ii)                                  an
Asset is subject to a Transfer Requirement that provides that transfer of such
Asset without compliance with such Transfer Requirement will result in
termination or other material impairment of any rights in relation 



 30
 









to such Asset,
and such Transfer Requirement is not waived, complied with or otherwise
satisfied prior to the Closing Date; or


(iii)                               the
holder of a Preference Right does not elect to purchase such Preference
Property or waive such Preference Right with respect to the transactions
contemplated by this Agreement prior to the Closing Date and the time in which
the Preference Right may be exercised has not expired,


then, unless otherwise agreed by Seller and Purchaser,
the Asset or portion thereof affected by such Preference Right or Transfer
Requirement (a “Retained Asset”) shall be held back from the Assets to be
transferred and conveyed to Purchaser at Closing and the Purchase Price to be
paid at Closing shall be reduced by the Allocated Value of such Retained Asset
pursuant to Section 7.7(b). Any Retained Asset
so held back at the initial Closing will be conveyed to Purchaser at a delayed
Closing (which shall become the new Closing Date with respect to such Retained
Asset), within ten (10) days following the date on which the suit, action or
other proceeding, if any, referenced in clause (i) above is settled or a
judgment is rendered (and no longer subject to appeal) permitting transfer of
the Retained Asset to Purchaser pursuant to this Agreement and Seller obtains,
complies with, obtains a waiver of or notice of election not to exercise or
otherwise satisfies all remaining Preference Rights and Transfer Requirements
with respect to such Retained Asset as contemplated by this Section (or if
multiple Assets are Retained Assets, on a date mutually agreed to by the
parties in order to consolidate, to the extent reasonably possible, the number
of Closings).  At the delayed Closing,
Purchaser shall pay Seller a purchase price equal to the amount by which the
Purchase Price was reduced on account of the holding back of such Retained
Asset (as adjusted pursuant to Section 2.2
through the new Closing Date therefor); provided, however, if all such
Preference Rights and Transfer Requirements with respect to any Retained Asset
so held back at the initial Closing are not obtained, complied with, waived or
otherwise satisfied as contemplated by this Section within one hundred eighty
(180) days after the initial Closing has occurred with respect to any Asset,
then such Retained Asset shall be eliminated from the Assets and shall become
an Excluded Asset and this Agreement, unless Seller and Purchaser agree to
proceed with a closing on such Retained Asset, in which case Purchaser and
Purchaser shall be deemed to have waived any objection (and shall be obligated
to indemnify the Seller Indemnified Persons for all Losses) with respect to
non-compliance with such Preference Rights and Transfer Requirements with
respect to such Retained 

Asset(s).


(d)           Purchaser
acknowledges that Seller desires to sell all of the Assets to Purchaser and
would not have entered into this Agreement but for Purchaser’s agreement to
purchase all of the Assets as herein provided. 
Accordingly, it is expressly understood and agreed that Seller does not
desire to sell any Property affected by a Preference Right to Purchaser unless
the sale of all of the Assets is consummated by the Closing Date in accordance
with the terms of this Agreement.  In
furtherance of the foregoing, Seller’s obligation hereunder to sell the
Preference Properties to Purchaser is expressly conditioned upon the
consummation by the Closing Date of the sale of all of the Assets (other than
Retained Assets or other Assets excluded pursuant to the express provisions of
this Agreement) in accordance with the terms of this Agreement, either by
conveyance to Purchaser or conveyance pursuant to an applicable Preference
Right; provided that, nothing herein is intended or shall operate to extend or
apply any Preference Right to any portion of the Assets which is not otherwise
burdened thereby.  Time is of the essence
with respect to the parties’ agreement to consummate the sale of the Assets by
the Closing Date (or by the delayed Closing Date pursuant to Section 7.7(c)).


 



 31















Section 7.8            Tax
Matters.


(a)           Subject to the provisions of Section 12.3, Seller shall be responsible for all Taxes
related to the Assets (other than ad valorem, property, severance, Hydrocarbon
production and similar Taxes based upon or measured by the ownership or
operation of the Assets or the production of Hydrocarbons therefrom, which are
addressed in Section 1.4)
attributable to any period of time at or prior to the Closing Date, and
Purchaser shall be responsible for all such Taxes related to the Assets
attributable to any period of time after the Closing Date.  Notwithstanding the foregoing, Seller shall
handle payment to the appropriate Governmental Body of all Taxes with respect
to the Assets which are required to be paid prior to Closing (and shall file
all Tax Returns with respect to such Taxes). 
If requested by Purchaser, Seller will assist Purchaser with preparation
of all ad valorem and property Tax Returns for periods ending on or before the
Closing Date (including any extensions requested).  Seller shall deliver to Purchaser within
thirty (30) days of filing copies of all Tax Returns to be filed by Seller
relating to the Assets and any supporting documentation to be provided by
Seller to Governmental Bodies for Purchaser’s approval, which shall not be
unreasonably withheld, excluding Tax Returns related to income tax, franchise
tax, or other similar Taxes.  Purchaser
shall file all Tax Returns covering Taxes treated as Property Costs that are
required to be filed after the Closing Date unless covered above.  With respect to such Tax Returns covering a
taxable period which includes the Effective Date, Purchaser shall provide a
copy of such Tax Return to Seller within 30 days of filing for Seller’s
approval, which shall not be unreasonably withheld.


(b)           Purchaser and Seller shall cooperate fully, as and to the
extent reasonably requested by the other party, in connection with the filing
of any Tax Returns and any audit, litigation or other Proceeding with respect
to Taxes.  Such cooperation shall include
the retention and (upon the other party’s request) the provision of records and
information which are reasonably relevant to any such audit, litigation or
other Proceeding and making employees available on a mutually convenient basis
to provide additional information and explanation of any material provided
hereunder.  Each of Purchaser and Seller
agrees (i) to retain all books and records with respect to Tax matters
pertinent to the acquired assets relating to any taxable period beginning
before the Closing Date until the expiration of the statute of limitations
(and, to the extent notified by Purchaser or Seller, any extensions thereof) of
the respective taxable periods, and to abide by all record retention agreements
entered into with any Governmental Body, and (ii) to give the other party
reasonable written notice prior to transferring, destroying or discarding any
such books and records and, if the other party so requests, each party shall
allow the other party the option of taking possession of such books and records
prior to their disposal.  Purchaser and
Seller further agree, upon request, to use their commercially reasonable
efforts to obtain any certificate or other document from any Governmental Body
or any other Person as may be necessary to mitigate, reduce or eliminate any
Tax that could be imposed with respect to the transactions contemplated.


(c)           Purchaser and Seller shall cooperate fully, as and to the
extent reasonably requested by the other party, in connection of accommodating
a 1031 exchange (as provided for under IRC Section 1031 of the Code).  Purchaser or Seller reserves the right, at or
prior to Closing, to assign its rights under this Agreement with respect to all
or a portion of the Purchase Price, and that portion of the Assets associated
therewith (“1031 Assets”), to a Qualified Intermediary (“QI”) (as that term is
defined in Section 1.1031(k)-1(g)(4)(v) of the Treasury Regulations) to
accomplish this transaction, in whole or in part, in a manner that will comply
with the requirements of a like-kind exchange (“Like-Kind Exchange”) pursuant
to Section 1031 of the Code.  If
Purchaser so elects, Purchaser may assign its rights under this Agreement to
the 



 32
 









1031 Assets to the QI. 
Seller hereby (i) consents to Purchaser’s assignment of its rights in
this Agreement with respect to the 1031 Assets, and (ii) if such an assignment
is made, agrees to transfer all or a portion of the Assets into the qualified
trust account at Closing as directed in writing by Purchaser.  Purchaser acknowledges and agrees that a
whole or partial assignment of this Agreement to a QI shall not release
Purchaser from any of its respective liabilities and obligations to Seller or
expand any liabilities or obligations of Seller under this Agreement.  Neither party represents to the other that
any particular tax treatment will be given to either party as a result of the
Like-Kind Exchange.  Seller shall not be
obligated to pay any additional costs or incur any additional obligations in
its sale of the Assets if such costs are the result of Purchaser’s Like-Kind
Exchange, and Purchaser shall hold harmless and indemnify Seller from and
against all claims, losses and liabilities (including reasonable attorneys’
fees, court costs and related expenses), if any, resulting from such a
Like-Kind Exchange.


Section 7.9            Further
Assurances.


After Closing, Seller and Purchaser each agrees to
take such further actions and to execute, acknowledge and deliver all such
further documents as are reasonably requested by the other party for carrying
out the purposes of this Agreement or of any document delivered pursuant to
this Agreement.


Section 7.10          Reserved.


Section 7.11          Insurance;
Financial Information.


(a)           Effective as of the Closing Date, Purchaser shall cause
the following insurance to be carried and maintained with respect to the
Assets: (i) general liability insurance with combined single limits per
occurrence of not less than $1,000,000.00 for bodily injury and property
damage, including property damage by blowout and cratering, completed
operations, and contractual liability as respects any contract into which
Purchaser may enter under the terms of this Agreement; and (ii) operators extra
expense insurance with limits of not less than $1,000,000.00 per occurrence,
covering the costs of controlling a blowout, and certain other related and/or
resulting costs and seepage and pollution liability.


(b)           Between the date of this Agreement and the Closing Date,
Seller shall deliver to the Chief Operating Officer of Purchaser copies of all production
reports and daily drilling reports relating to Seller’s operation of the Assets
promptly after the preparation thereof in the ordinary course of business.


Section 7.12          No
Solicitation of Transactions.


So long as Purchaser is not in default of this
Agreement or, if Purchaser is in default hereunder, Purchaser cures such
default within ten (10) days after receiving written notice thereof from
Seller, Seller shall not, directly or indirectly, through any officer,
director, stockholder, employee, agent, financial advisor, banker or other
representative or Affiliate, or otherwise, solicit, initiate, or encourage the
submission of any proposal or offer from any Person relating to any acquisition
or purchase of all or any material portion of the Assets or participate in any
negotiations regarding, or furnish to any other Person any information with
respect to, or otherwise cooperate in any way with, or assist or participate
in, facilitate, or encourage, any effort or attempt by any other Person to do
or seek any of the foregoing.  Seller
shall communicate as soon as reasonably practicable to Purchaser the material
terms of any such proposal (and the identity of the party making such proposal)
which it may receive and, if such 



 33
 









proposal is in writing, Seller shall promptly deliver
a copy of such proposal to Purchaser. 
Seller agrees not to release any third party from, or waive any
provision of, any confidentiality agreement relating to the Assets to which
Seller or any of its Affiliates is a party. 
Seller immediately shall cease and cause to be terminated all existing
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing.


Section 7.13          Transition
Services Agreement.


Between the date hereof and the Closing Date, each of
Seller and Purchaser shall use its reasonable efforts to negotiate in good
faith a form of transition services agreement on terms that are mutually
acceptable to Seller and Purchaser to be executed at Closing by Seller and
Purchaser (the “Transition Services Agreement”).


Section 7.14          Employees.


As promptly as reasonably practical following the
execution of this Agreement, the parties will use reasonable efforts to work
together concerning employees.


Section 7.15          Hedges.


(a)           Seller has entered into the hedging transactions set forth
on Schedule 7.15
(the “Hedging Transactions”) with the counterparties specified therein (the “Counterparties”).  Purchaser covenants and agrees that each of
the Counterparties has agreed and will (i) allow the assignment by Seller to
Purchaser at the Closing of all of the trades that are the subject of the
Hedging Transactions and (ii) release Seller from any and all obligations and
liabilities related or attributable to such Hedging Transactions upon such
assignment.  The respective agreements
between Seller and each Counterparty shall be evidenced by a Novation Agreement
that is in form and substance reasonably acceptable to Seller.


(b)           At the Closing, Purchaser shall accept an assignment from
Seller of all of the trades that are the subject of the Hedging Transactions
and shall assume all obligations and liabilities attributable thereto pursuant
to documentation required by the Counterparties.


(c)           Within five (5) Business Days of the termination by
Purchaser or Seller, as the case may be, of this Agreement in accordance with Section 10.1, Seller shall furnish to
Purchaser written notice of whether it elects to unwind the Hedging
Transactions.  If Seller notifies
Purchaser that it does not elect to unwind the Hedging Transactions, Purchaser
shall have no further obligations whatsoever to Seller with respect to the
Hedging Transactions.  However, if Seller
notifies Purchaser that it elects to unwind the Hedging Transactions, Purchaser
shall be obligated for and shall promptly pay, and Purchaser does hereby agree
to indemnify and hold harmless Seller from and against, any and all Losses
suffered by Seller resulting from or attributable to the Hedging Transactions
and the unwind thereof unless the termination of this Agreement resulted from
the default by Seller of its obligations under this Agreement, in which case
Purchaser shall not be liable for such Losses.


Section
7.16          Contribution of Oklahoma
Assets.


Purchaser
has requested that Seller, at least ten (10) Business Days prior to Closing,
(a) form a Delaware limited liability company and (b) contribute or otherwise
transfer all of the Properties and other related Assets located in Oklahoma to
such limited liability company prior to Closing.  Although Purchaser acknowledges that Seller
is under no obligation to 



 34
 









accommodate Purchaser’s request, Seller agrees to
analyze such request and to notify Purchaser within ten (10) Business Days
after the date hereof as to whether Seller agrees to accommodate such
request.  In the event Seller elects to
accommodate Purchaser’s request, Seller shall convey all membership interests
of such Delaware limited liability company to Purchaser as part of the Assets
at Closing.  Purchaser further
acknowledges that if Seller elects not to accommodate Purchaser’s request,
Purchaser shall nonetheless be obligated to consummate the transactions
contemplated under this Agreement in accordance with the terms hereof.


Section
7.17          [RESERVED].


Section
7.18          Cure of
Misrepresentations.


If any of the representations and warranties contained
in Article 5 hereof are determined
(whether by notice from Purchaser or otherwise) to have been untrue or
incorrect as of the date of this Agreement, then any cure by Seller of same
shall be at its own expense.


Section
7.19          NAGS.


Anadarko Gathering Company shall have the right to
convey NAGS to any Permitted NAGS Buyer without the prior consent of Purchaser,
but not to any other Person without obtaining the prior written consent of
Purchaser, which consent shall not be unreasonably withheld.  As a condition to such conveyance, the
Permitted NAGS Buyer shall acquire NAGS subject to the terms of the NAGS
Agreement.


ARTICLE 8

CONDITIONS TO CLOSING


Section 8.1            Conditions
of Seller to Closing.


The obligations of Seller to consummate the
transactions contemplated by this Agreement are subject, at the option of
Seller, to the satisfaction or waiver by Seller on or prior to Closing of each
of the following conditions:


(a)           Representations. Each of the representations and
warranties of Purchaser contained in this Agreement shall be true and correct
in all material respects (other than those representations and warranties of
Purchaser that are qualified by materiality, which shall be true and correct in
all respects) as of the Closing Date as though made on and as of the Closing
Date, except to the extent that any such representation or warranty is made as
of a specified date, in which case such representation or warranty shall have
been true and correct in all material respects (other than those
representations and warranties of Purchaser that are qualified by materiality,
which shall be true and correct in all respects) as of such specified date;


(b)           Performance. 
Purchaser shall have performed and observed, in all material respects,
all covenants and agreements to be performed or observed by it under this
Agreement prior to or on the Closing Date;


(c)           Proceedings. 
No Proceeding by a third party (including any Governmental Body) seeking
to restrain, enjoin or otherwise prohibit the consummation of the transactions
contemplated by this Agreement shall be pending before any Governmental Body
and no order, 



 35
 









writ, injunction or decree shall have been entered and
be in effect by any court or any Governmental Body of competent jurisdiction,
and no statute, rule, regulation or other requirement shall have been
promulgated or enacted and be in effect, that on a temporary or permanent basis
restrains, enjoins or invalidates the transactions contemplated hereby; provided, however, the Closing shall proceed notwithstanding
any Proceedings seeking to restrain, enjoin or otherwise prohibit consummation
of the transactions contemplated hereby brought by holders of Preference Rights
seeking to enforce such rights with respect to the Assets with aggregate Allocated
Values of less than ten percent (10%) of the total unadjusted Purchase Price,
and the Assets subject to such Proceedings shall be treated in accordance with Section 7.7;


(d)           Deliveries. 
Purchaser shall have delivered (or be ready, willing and able to
immediately deliver) to Seller duly executed counterparts of the Conveyance and
all other documents and certificates to be delivered by Purchaser under Section 9.3 and shall have performed (or be
ready, willing and able to immediately perform) the other obligations required
to be performed by it under Section 9.3;


(e)           Title Defects. 
The sum of all asserted but uncured Title Defect Amounts for Title
Defects determined under Section 3.4(g)
prior to Closing, less the sum of all Title Benefit Amounts for Title Benefits
determined under Section 3.4(h)
prior to the Closing, plus Environmental Defects Amounts attributable to
Environmental Defects and plus Losses from casualties to and takings of the
Assets, determined or asserted in accordance with this Agreement, shall be less
than ten percent (10%) of the total unadjusted Purchase Price; and


(f)            HSR Act. 
Any waiting period applicable to the consummation of the transaction
contemplated by this Agreement under the HSR Act shall have lapsed or
terminated (by early termination or otherwise).


Section 8.2            Conditions
of Purchaser to Closing.


The obligations of Purchaser to consummate the
transactions contemplated by this Agreement are subject, at the option of
Purchaser, to the satisfaction or waiver by Purchaser on or prior to Closing of
each of the following conditions:


(a)           Representations. Each of the representations and
warranties of Seller contained in this Agreement shall be true and correct in
all material respects (other than those representations and warranties of
Seller that are qualified by materiality or Material Adverse Effect, which
shall be true and correct in all respects) as of the Closing Date as though
made on and as of the Closing Date, except to the extent that any such
representation or warranty is made as of a specified date, in which case such
representation or warranty shall have been true and correct in all material
respects (other than those representations and warranties of Seller that are
qualified by materiality or Material Adverse Effect, which shall be true and
correct in all respects) as of such specified date;


(b)           Performance. Seller shall have performed and
observed, in all material respects, all covenants and agreements to be
performed or observed by it under this Agreement prior to or on the Closing
Date;


(c)           Proceedings. 
No Proceeding by a third party (including any Governmental Body) seeking
to restrain, enjoin or otherwise prohibit the consummation of the transactions
contemplated by this Agreement shall be pending before any Governmental Body
and no order, 



 36
 









writ, injunction or decree shall have been entered and
be in effect by any court or any Governmental Body of competent jurisdiction,
and no statute, rule, regulation or other requirement shall have been
promulgated or enacted and be in effect, that on a temporary or permanent basis
restrains, enjoins or invalidates the transactions contemplated hereby; provided, however, the Closing shall proceed notwithstanding
any Proceedings seeking to restrain, enjoin or otherwise prohibit consummation
of the transactions contemplated hereby brought by holders of Preference Rights
seeking to enforce such rights with respect to the Assets with aggregate
Allocated Values of less than ten percent (10%) of the total unadjusted
Purchase Price, and the Assets subject to such Proceedings shall be treated in
accordance with Section 7.7;


(d)           Deliveries. 
Seller shall have delivered (or be ready, willing and able to
immediately deliver) to Purchaser duly executed counterparts of the Conveyance
and all other documents and certificates to be delivered by Seller under Section 9.2;


(e)           Title Defects. 
The sum of all asserted but uncured Title Defect Amounts for Title
Defects determined under Section 3.4(g)
prior to the Closing, less the sum of all Title Benefit Amounts for Title
Benefits determined under Section 3.4(h)
prior to the Closing, plus Environmental Defects Amounts attributable to
Environmental Defects and plus Losses from casualties to and takings of the
Assets, determined or asserted in accordance with this Agreement, shall be less
than ten percent (10%) of the unadjusted Purchase Price;


(f)            HSR Act. 
Any waiting period applicable to the consummation of the transaction
contemplated by this Agreement under the HSR Act shall have lapsed or terminated
(by early termination or otherwise); and


(g)           Required Transfer Requirements.  The sum of all Allocated Values for all
Retained Assets resulting from Transfer Requirements that have not been
obtained or waived prior to Closing shall not exceed $17,200,000.


ARTICLE 9

CLOSING


Section 9.1            Time
and Place of Closing.


(a)           Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Article 10, and subject to the satisfaction
or waiver of the conditions set forth in Article
8 (other than conditions the fulfillment of which by their nature is
to occur at the completion of the transactions contemplated by this Agreement
(the “Closing”)), the Closing shall take place at 10:00 a.m., local time, on
May 2, 2007, at the offices of Fulbright & Jaworski L.L.P.,
Houston, Texas, unless another date, time or place is mutually agreed to in
writing by Purchaser and Seller.  If any
of the conditions (other than conditions the fulfillment of which by their
nature is to occur at the Closing) set forth in Article 8 are not satisfied or waived at the time the Closing
is to occur pursuant to the foregoing sentence of this Section 9.1(a), then the Closing shall
occur on a date thereafter that is the third Business Day after the
satisfaction or waiver of all such conditions.


(b)           The date on which the Closing occurs is herein referred to
as the “Closing Date.”



 37
 









Section 9.2            Obligations
of Seller at Closing.


At the Closing, upon the terms and subject to the
conditions of this Agreement, Seller shall deliver or cause to be delivered to
Purchaser, or perform or cause to be performed, the following:


(a)           the Conveyance in sufficient duplicate originals to allow
recording in all appropriate jurisdictions and offices, duly executed by
Seller;


(b)           letters-in-lieu of transfer orders covering the Assets,
duly executed by Seller;


(c)           a certificate duly executed by an authorized corporate
officer of Seller, dated as of Closing, certifying on behalf of Seller that the
conditions set forth in Section 8.2(a) and
Section 8.2(b) have been
fulfilled;


(d)           a legal opinion of APC’s Associate General Counsel, dated
as of the Closing, regarding the due authorization, execution, delivery and
performance by Seller of this Agreement and the transactions contemplated
hereby, in form and substance reasonably satisfactory to Purchaser;


(e)           the Transition Services Agreement, duly executed by
Seller; and


(f)            the Seismic License, duly executed by Seller.


Section 9.3            Obligations
of Purchaser at Closing.


At the Closing, upon the terms and subject to the
conditions of this Agreement, Purchaser shall deliver or cause to be delivered
to Seller, or perform or caused to be performed, the following:


(a)           a wire transfer of the Closing Payment, in same-day funds;


(b)           the Conveyance, duly executed by Purchaser;


(c)           letters-in-lieu of transfer orders covering the Assets,
duly executed by Purchaser;


(d)           a certificate by an authorized corporate officer of
Purchaser, dated as of Closing, certifying on behalf of Purchaser that the
conditions set forth in Section 8.1(a)
and Section 8.1(b) have been
fulfilled;


(e)           a legal opinion of counsel to Purchaser, dated as of the
Closing, regarding the due authorization, execution, delivery and performance
by Purchaser of this Agreement and the transactions contemplated hereby, in
form and substance reasonably satisfactory to Seller;


(f)            the Transition Services Agreement, duly executed by
Purchaser; and


(g)           the Seismic License, duly executed by Purchaser.


Section 9.4            Closing
Adjustments.


(a)           Not later than three (3) Business Days prior to the
Closing Date, Seller shall prepare and deliver to Purchaser, based upon the
best information available to Seller, a preliminary settlement statement
estimating the Adjusted Purchase Price after giving effect to all adjustments
listed in Section 2.2.  The estimate delivered in accordance with
this Section 



 38
 









9.4(a) shall constitute the
dollar amount to be paid by Purchaser to Seller at the Closing (the “Closing
Payment”). Until one (1) Business Day before the Closing Date, Purchaser shall
have the opportunity to review and discuss the preliminary settlement statement
with Seller; provided, however, Seller shall not be required to make any change
thereto to which Seller does not agree.


(b)           As soon as reasonably practicable after the Closing but
not later than ninety (90) days following the Closing Date, Seller shall
prepare and deliver to Purchaser a statement setting forth the final
calculation of the Agreed Purchase Price and showing the calculation of each
adjustment, based, to the extent possible, on actual credits, charges, receipts
and other items before and after the Effective Time and taking into account all
adjustments provided for in this Agreement (the “Final Purchase Price”). Seller
shall, at Purchaser’s request, supply reasonable documentation available to
support any credit, charge, receipt or other item.  Seller shall afford Purchaser and its
representatives the opportunity to review such statement and the supporting
schedules, analyses, workpapers, and other underlying records or documentation
as are reasonably necessary and appropriate in Purchaser’s review of such
statement.  Each party shall cooperate
fully and promptly with the other and their respective representatives in such
examination with respect to all reasonable requests related thereto.  As soon as reasonably practicable but not
later than the 30th day following receipt of Seller’s statement hereunder,
Purchaser shall deliver to Seller a written report containing any changes that
Purchaser proposes be made to such statement. Seller and Purchaser shall
undertake to agree on the final statement of the Final Purchase Price no later
than one hundred eighty (180) days after the Closing Date (the “Final
Settlement Date”).  In the event that Seller
and Purchaser cannot reach agreement by the Final Settlement Date, either party
may refer the remaining matters in dispute to Ernst & Young LLP, or such
other nationally-recognized independent accounting firm as may be mutually
accepted by Purchaser and Seller, for review and final determination (the “Agreed
Accounting Firm”).  If issues are
submitted to the Agreed Accounting Firm for resolution, Seller and Purchaser
shall each enter into a customary engagement letter with the Agreed Accounting
Firm at the time the issues remaining in dispute are submitted to the Agreed
Accounting Firm.  The Agreed Accounting
Firm will be directed to (i) review the statement setting forth Seller’s
calculation of the Final Purchase Price and the records relating thereto only
with respect to items identified by Purchaser in its written report containing
changes to such statement that remain disputed immediately following the Final
Settlement Date and (ii) determine the final adjustments.  Each party shall furnish the Agreed
Accounting Firm such work papers and other records and information relating to
the objections in dispute as the Agreed Accounting Firm may reasonably request
and that are available to such party or its Affiliates (and such parties’
independent public accountants).  The
parties will, and will cause their representatives to, cooperate and assist in
the conduct of any review by the Agreed Accounting Firm, including, but not
limited to, making available books, records and, as available, personnel as
reasonably required.  The Agreed
Accounting Firm shall conduct the arbitration proceedings in Houston, Texas in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, to the extent such rules do not conflict with the terms of this Section 9.4.  The Agreed Accounting Firm’s determination
shall be made within thirty (30) days after submission of the matters in
dispute and shall be final and binding on both parties, without right of appeal
and such decision shall constitute an arbitral award upon which a judgment may
be entered by a court having jurisdiction thereof.  In determining the proper amount of any
adjustment to the Final Purchase Price, the Agreed Accounting Firm shall not
increase the Final Purchase Price more than the increase proposed by Seller nor
decrease the Final Asset Value more than the decrease proposed by Purchaser, as
applicable, and may not award damages or penalties to either party with respect
to any matter. Seller and Purchaser shall each bear its own legal fees and
other costs of presenting its case. Each party shall bear one-half of the costs
and expenses 



 39
 









of the accounting firm. Within ten (10) Business Days
after the date on which the parties or the Agreed Accounting Firm, as
applicable, finally determines the disputed matters, (x) Purchaser shall pay to
Seller the amount by which the Final Purchase Price exceeds the Closing Payment
or (y) Seller shall pay to Purchaser the amount by which the Closing Payment
exceeds the Final Purchase Price, as applicable. Any post-Closing payment
pursuant to this Section 9.4(b) shall bear interest
at the Agreed Interest Rate from (but not including) the Closing Date to (and
including) the date both Purchaser and Seller have executed the final
settlement statement.


(c)           All payments made or to be made hereunder to Seller shall
be by electronic transfer of immediately available funds to the account of
Anadarko Petroleum Corporation, Account No. 5762707 at JPMorgan Chase, Chicago,
IL, ABA No. 021000021, for the credit of Seller or to such other bank and
account as may be specified by Seller in writing. All payments made or to be
made hereunder to Purchaser shall be by electronic transfer of immediately
available funds to a bank and account specified by Purchaser in writing to Seller.


ARTICLE 10

TERMINATION


Section 10.1          Termination.


This Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing:


(a)           by mutual written consent of Seller and Purchaser;


(b)           by either Seller or Purchaser, if:


(i)                                     the Closing shall
not have occurred on or before June 1, 2007 (the “Termination Date”); provided,
however, that the right to terminate this Agreement under this Section 10.1(b)(i) shall not be available
(A) to Seller, if any breach of this Agreement by Seller has been the principal
cause of, or resulted in, the failure of the Closing to occur on or before the
Termination Date or (B) to Purchaser, if any breach of this Agreement by
Purchaser has been the principal cause of, or resulted in, the failure of the
Closing to occur on or before the Termination Date; or


(ii)                                  there shall be any
Law that makes consummation of the transactions contemplated hereby illegal or
otherwise prohibited or a Governmental Body shall have issued an order, decree,
or ruling or taken any other action permanently restraining, enjoining, or
otherwise prohibiting the consummation of the transactions contemplated hereby,
and such order, decree, ruling, or other action shall have become final and non
appealable;


(c)           by Seller, if (i) any of the representations and
warranties of Purchaser contained in this Agreement shall not be true and
correct in all material respects (provided that any such representation or
warranty that is already qualified by a materiality standard or a material
adverse effect qualification shall not be further qualified); or (ii) Purchaser
shall have failed to fulfill in any material respect any of its obligations
under this Agreement; and, in the case of each of clauses (i) and (ii), such
misrepresentation, or breach of warranty, if curable, has not been cured within
ten (10) days after written notice thereof from Seller to Purchaser; provided 



 40
 









that any cure period shall not extend beyond the
Termination Date and shall not extend the Termination Date; or


(d)           by Purchaser, if (i) any of the representations and
warranties of Seller contained in this Agreement shall not be true and correct
in all material respects (provided that any such representation or warranty
that is already qualified by a materiality or Material Adverse Effect
qualification shall not be further qualified); or (ii) Seller shall have failed
to fulfill in any material respect any of its obligations under this Agreement,
and, in the case of each of clauses (i) and (ii), such misrepresentation,
breach of warranty or failure, if curable, has not been cured within ten (10)
days after written notice thereof from Purchaser to Seller; provided that any
cure period shall not extend beyond the Termination Date and shall not extend
the Termination Date.


Section 10.2          Effect
of Termination.


If this Agreement is terminated pursuant to Section 10.1, this Agreement shall become void and of no
further force or effect (except for the provisions of Section 4.4,
Section 5.6, Section 6.5, Section 7.5, Section 7.15, Section 11.10, Section 11.11 and Section
11.12 of this Agreement and this Article 10,
the Section entitled “Definitions,” and Article 12
(other than Section 12.6), all of which shall
continue in full force and effect). 
Notwithstanding the foregoing, nothing contained in this Section 10.2 shall relieve any party from liability for
Losses resulting from its breach of this Agreement.


Section 10.3          Distribution
of Deposit Upon Termination.


(a)           If Seller terminates this Agreement (i) because Purchaser
has failed to comply with any provision of
Sections 8.1(a), 8.1(b) or 8.1(d);  or
(ii) as the result of any default or breach by Purchaser of Purchaser’s
obligations hereunder, then Seller may retain the Deposit, as its sole and
exclusive remedy as liquidated damages, free of any claims by Purchaser or any
other Person with respect thereto.  It is
expressly stipulated by the parties that the actual amount of damages resulting
from such a termination would be difficult if not impossible to determine
accurately because of the unique nature of this Agreement, the unique nature of
the Assets, the uncertainties of applicable commodity markets and differences
of opinion with respect to such matters, and that the liquidated damages
provided for herein are a reasonable estimate by the parties of such damages.


(b)           If this Agreement is terminated for any reason other than
the reasons set forth in Section 10.3(a),  then Seller shall deliver the Deposit to
Purchaser without interest thereon, free of any claims by Seller or any other
Person with respect thereto after Purchaser has satisfied its obligations under Section 7.15.


(c)           Notwithstanding anything to the contrary in this
Agreement, Purchaser shall not be entitled to receive interest on the Deposit,
whether the Deposit is applied against the Purchase Price or returned to
Purchaser pursuant to this Section 10.3.



 41
 









ARTICLE 11

POST-CLOSING OBLIGATIONS; INDEMNIFICATION;

LIMITATIONS; DISCLAIMERS AND WAIVERS


Section 11.1          Receipts.


Except as otherwise provided in this Agreement, any
Hydrocarbons produced from or attributable to the Assets (and all products and
proceeds attributable thereto) and any other income, proceeds, receipts and
credits attributable to the Assets which are not reflected in the adjustments
to the Purchase Price following the final adjustment pursuant to Section 9.4(b) shall be treated as follows: (a) all
Hydrocarbons produced from or attributable to the Assets (and all products and
proceeds attributable thereto) and all other income, proceeds, receipts and
credits earned with respect to the Assets to which Purchaser is entitled under Section 1.4 shall be the sole property and entitlement of
Purchaser, and, to the extent received by Seller, Seller shall fully disclose,
account for and remit the same promptly to Purchaser, and (b) all Hydrocarbons
produced from or attributable to the Assets (and all products and proceeds
attributable thereto) and all other income, proceeds, receipts and credits
earned with respect to the Assets to which Seller is entitled under Section 1.4 shall be the sole property and entitlement of
Seller and, to the extent received by Purchaser, Purchaser shall fully
disclose, account for and remit  the same
promptly to Seller.


Section 11.2          Expenses.


Except for Royalty Amounts and except as otherwise
provided in this Agreement, any Property Costs which are not reflected in the
adjustments to the Purchase Price following the final adjustment pursuant to Section 9.4(b) shall be treated as follows: (a) all Property
Costs for which Seller is responsible under Section 1.4
shall be the sole obligation of Seller and Seller shall promptly pay, or if
paid by Purchaser, promptly reimburse Purchaser for and hold Purchaser harmless
from and against same; and (b) all Property Costs for which Purchaser is responsible
under Section 1.4 shall be the sole
obligation of Purchaser, and Purchaser shall promptly pay, or if paid by
Seller, promptly reimburse Seller for and hold Seller harmless from and against
same. Seller is entitled to resolve all joint interest audits and other audits
of Property Costs covering periods for which Seller is wholly responsible and
Purchaser is entitled to resolve all joint interest audits and other audits of
Property Costs covering periods for which Purchaser is in whole or in part responsible;
provided that Purchaser shall not agree to any adjustments to previously
assessed costs for which Seller is liable without the prior written consent of
Seller, such consent not to be unreasonably withheld. Purchaser shall provide
Seller with a copy of all applicable audit reports and written audit agreements
received by Purchaser and relating to periods for which Seller is partially
responsible.


Section 11.3          Assumed
Seller Obligations.


Subject to the indemnification by Seller under  Section 11.5,
on the Closing Date, Purchaser shall assume and hereby agrees to fulfill,
perform, pay and discharge (or cause to be fulfilled, performed, paid or
discharged) all of the obligations and liabilities of Seller, known or unknown,
with respect to the Assets, regardless of whether such obligations or
liabilities arose prior to, on or after the Effective Time, including but not
limited to obligations to (a) furnish makeup gas according to the terms of
applicable gas sales, gathering or transportation contracts, and to satisfy all
other gas balancing obligations, if any, (b) pay working interests, royalties,
overriding royalties and other interests held in suspense, (c) properly plug
and abandon any and all wells, including inactive wells or temporarily
abandoned wells, drilled on the Properties, as required by Law, (d) replug any
well, wellbore, or previously plugged well on the Properties to the extent
required by Governmental Body, (e) dismantle, salvage and remove any equipment,
structures, materials, platforms, flowlines, and property of whatever kind
related to or associated with operations and activities conducted on the
Properties, (f) clean up, restore and/or remediate the premises covered by or
related to the Assets in accordance with applicable agreements and Laws, (g)
perform all obligations applicable to or imposed on the


 



 42















lessee, owner, or
operator under the Leases or with respect to the Mineral Interests and related
contracts, or as required by applicable Laws, and (h) pay working interests,
royalties, overriding royalties and other interests payable to third parties on
account of production from the Assets other than any royalties owed on account
of production from the Properties before the Closing Date as a result of or
attributable to the resolution of the Royalty Actions (collectively, “Royalty
Amounts”) (all of said obligations and liabilities, subject to the exclusions
below, herein being referred to as the “Assumed Seller Obligations”); provided,
however, that the Assumed Seller Obligations shall not include, and Purchaser
shall have no obligation to assume, any obligations or liabilities of Seller to
the extent that they are (such excluded obligations and liabilities, the “Excluded
Seller Obligations”):


(i)                                     attributable
to or arise out of the Excluded Assets;


(ii)                                  except
for Royalty Amounts and except to the extent covered by Section 11.3(v)(D) below, the continuing
responsibility of Seller under Section 11.1
or Section 11.2;


(iii)                               attributable
to or arising out of matters for which Seller is required to indemnify
Purchaser under Section 11.5(c);


(iv)                              except
for Royalty Amounts, Property Costs for which Seller is responsible pursuant to
Section 1.4(b);


(v)                                 (A)
attributable to or arising out of Proceedings set forth under Category 1 on Schedule 5.7(a), (B) Losses owed as a
result of the resolution of the Proceeding listed in item 6 under Category 3 on
Schedule 5.7(a) to the extent such
Losses result from or are attributable to production from the Properties
occurring before the Closing Date, (C) Losses owed as a result of the
resolution of the Proceeding listed in item 7 under Category 3 on Schedule 5.7(a) to the extent such Losses
result from or are attributable to actions occurring before the Closing Date,
(D) royalties owed on account of production from the Properties before the
Closing Date as a result of or attributable to the resolution of the Royalty
Actions and all other Losses owed as a result of the resolution of the Royalty
Actions to the extent such Losses result from or are attributable to production
from such Properties before the Closing Date, (E) Proceedings arising out of or
attributable to Seller’s ownership or operation of the Assets arising after the
date hereof but before Closing, or (F) Proceedings that arise after Closing for
personal injury or death arising and occurring before Closing which is attributable
to Seller’s (or its Affiliates’) ownership or operation of the Assets;


(vi)                              attributable
to or arise out of any noncompliance of Law set forth on Schedule 5.7(b);


(vii)                           Retained
Employee Liabilities; or


(viii)                        attributable to or arise out of any off-site
Environmental Liabilities occurring prior to the Closing Date that relate to
the Assets.



 43
 









Section 11.4          Survival.


(a)           All
representations and warranties of Seller and Purchaser contained herein shall
survive the Closing Date and shall terminate on the first anniversary of the
Closing Date; provided, however, that the representations and warranties
contained in Section 5.3, Section 5.4, Section 5.6, Section 5.8, Section 6.2,
Section 6.3, and Section 6.5 (collectively,
the “Fundamental Representations”)  shall
survive until the expiration of the applicable statute of limitations
period.  Upon the termination of a
representation or warranty in accordance with the foregoing, such
representation or warranty shall have no further force or effect for any purpose
under this Agreement.  The covenants and
other agreements of Seller and Purchaser set forth in this Agreement shall
survive the Closing Date until fully performed.


(b)           No
party hereto shall have any indemnification obligation pursuant to this Article 11 or otherwise in respect of any
representation, warranty, covenant or agreement unless it shall have received
from the party seeking indemnification a written notice (a “Claim Notice”) of
the existence of the claim for or in respect of which indemnification in
respect of such representation, warranty, covenant or agreement is being sought
on or before the expiration of the applicable survival period set forth in Section 11.4(a).  If an Indemnified Party delivers a Claim
Notice to an Indemnifying Party before the expiration of the applicable
survival period set forth in Section 11.4(a),
then the applicable representation, warranty, covenant or agreement shall
survive until, but only for purposes of, the resolution of the matter covered
by such Claim Notice.  A Claim Notice
shall set forth with reasonable specificity (1) the basis for such claim under
this Agreement, and the facts that otherwise form the basis of such claim and
(2) to the extent reasonably estimable, an estimate of the amount of such claim
(which estimate shall not be conclusive of the final amount of such claim) and
an explanation of the calculation of such estimate.


Section 11.5          Indemnification
by Seller.


From and after the Closing, subject to the terms and
conditions of this Article 11,
Seller shall jointly and severally indemnify, defend and hold harmless
Purchaser and its directors, officers, employees, stockholders, members,
agents, consultants, advisors and other representatives (including legal
counsel, accountants and financial advisors) and Affiliates and the successors
and permitted assigns of this Agreement of Purchaser (collectively, the “Purchaser
Indemnified Persons”) from and against any and all Losses asserted against,
resulting from, imposed upon, or incurred or suffered by any Purchaser
Indemnified Person to the extent resulting from, arising out of or relating to:


(a)           any
breach of any representation or warranty of Seller contained in this Agreement
or confirmed in any certificate furnished by or on behalf of Seller in
connection with this Agreement;


(b)           any
breach or nonfulfillment of or failure to perform any covenant or agreement of
Seller contained in this Agreement or confirmed in any certificate furnished by
or on behalf of Seller in connection with this Agreement; and


(c)           any
Excluded Seller Obligations.


Section 11.6          Indemnification
by Purchaser.


From and after the Closing, subject to the terms and
conditions of this Article 11,
Purchaser shall indemnify, defend and hold harmless Seller and its directors,
officers, employees, agents, consultants, stockholders, advisors and other
representatives (including 



 44
 









legal counsel,
accountants and financial advisors), and Seller’s successors, permitted assigns
of this Agreement and Affiliates (collectively, the “Seller Indemnified Persons”)
from and against any and all Losses, asserted against, resulting from, imposed
upon, or incurred or suffered by any Seller Indemnified Person, directly or
indirectly, to the extent resulting from, arising out of, or relating to:


(a)           any
breach of any representation or warranty of Purchaser contained in this
Agreement or confirmed in any certificate furnished by or on behalf of
Purchaser to Seller in connection with this Agreement REGARDLESS OF FAULT;


(b)           any
breach or nonfulfillment of or failure to perform any covenant or agreement of
Purchaser contained in this Agreement REGARDLESS
OF FAULT or confirmed in any certificate furnished by or on behalf
of Purchaser to Seller in connection with this Agreement;


(c)           the
ownership, use or operation of the Assets after the Effective Time;


(d)           the
Assumed Seller Obligations REGARDLESS OF
FAULT; and


(e)           Environmental
Laws, Environmental Liabilities, the release of materials into the environment
or protection of human health, safety, natural resources or the environment, or
any other environmental condition of the Assets, REGARDLESS OF FAULT.


Section 11.7          Indemnification
Proceedings.


(a)           In
the event that any claim or demand for which Seller or Purchaser (such Person,
an “Indemnifying Party”) may be liable to an Purchaser Indemnified Person under
Section 11.5 or to an Seller
Indemnified Person under Section 11.6
(an “Indemnified Party”) is asserted against or sought to be collected from an
Indemnified Party by a third party (a “Third Party Claim,”) the Indemnified Party
shall with reasonable promptness notify the Indemnifying Party of such Third
Party Claim by delivery of a Claim Notice, provided that the failure or delay
to so notify the Indemnifying Party shall not relieve the Indemnifying Party of
its obligations under this Article 11,
except (and solely) to the extent that the Indemnifying Party demonstrates that
its defense of such Third Party Claim is actually and materially prejudiced
thereby.  The Indemnifying Party shall
have thirty (30) days from receipt of the Claim Notice from the Indemnified
Party (in this Section 11.7, the “Notice
Period”) to notify the Indemnified Party whether or not the Indemnifying Party
desires, at the Indemnifying Party’s sole cost and expense, to defend the
Indemnified Party against such claim or demand; provided, that the Indemnified
Party is hereby authorized prior to and during the Notice Period, and at the
cost and expense of the Indemnifying Party, to file any motion, answer or other
pleading that it shall reasonably deem necessary to protect its interests or
those of the Indemnifying Party.  The
Indemnifying Party shall have the right to assume the defense of such Third
Party Claim only if and for so long as the Indemnifying Party (i) notifies the
Indemnified Party during the Notice Period that the Indemnifying Party is
assuming the defense of such Third Party Claim, (ii) uses counsel of its own
choosing that is reasonably satisfactory to the Indemnified Party, and (iii)
conducts the defense of such Third Party Claim in an active and diligent
manner.  If the Indemnifying Party is
entitled to, and does, assume the defense of any such Third Party Claim, the
Indemnified Party shall have the right to employ separate counsel at its own
expense and to participate in the defense thereof; provided, however, that
notwithstanding the foregoing, the Indemnifying Party shall pay the reasonable
attorneys’ fees of the Indemnified Party if the Indemnified Party’s counsel
shall have advised the Indemnified Party that there is a conflict of interest
that could make it inappropriate under applicable standards of professional
conduct to 



 45
 









have common counsel for the Indemnifying Party and the Indemnified
Party (provided that the Indemnifying Party shall not be responsible for paying
for more than one separate firm of attorneys and one local counsel to represent
all of the Indemnified Parties subject to such Third Party Claim).  If the Indemnifying Party elects (and is
entitled) to assume the defense of such Third Party Claim, (i) no compromise or
settlement thereof or consent to any admission or the entry of any judgment
with respect to such Third Party Claim may be effected by the Indemnifying
Party without the Indemnified Party’s written consent (which shall not be
unreasonably withheld, conditioned or delayed) unless the sole relief provided
is monetary damages that are paid in full by the Indemnifying Party (and no
injunctive or other equitable relief is imposed upon the Indemnified Party) and
there is an unconditional provision whereby each plaintiff or claimant in such
Third Party Claim releases the Indemnified Party from all liability with
respect thereto and (ii) the Indemnified Party shall have no liability with
respect to any compromise or settlement thereof effected without its written
consent (which shall not be unreasonably withheld).  If the Indemnifying Party elects not to
assume the defense of such Third Party Claim (or fails to give notice to the
Indemnified Party during the Notice Period or otherwise is not entitled to
assume such defense), the Indemnified Party shall be entitled to assume the
defense of such Third Party Claim with counsel of its own choice, at the
expense and for the account of the Indemnifying Party; provided, however, that
the Indemnified Party shall make no settlement, compromise, admission, or
acknowledgment that would give rise to liability on the part of any
Indemnifying Party without the prior written consent of such Indemnifying
Party, which consent shall not be unreasonably withheld, conditioned or
delayed.


(b)           Notwithstanding
the foregoing, the Indemnifying Party shall not be entitled to control (but
shall be entitled to participate at its own expense in the defense of), and the
Indemnified Party, shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any Third Party Claim
(i) at the reasonable expense of the Indemnifying Party, as to which the
Indemnifying Party fails to assume the defense during the Notice Period after
the Indemnified Party gives notice thereof to the Indemnifying Party or (ii) at
the reasonable expense of the Indemnifying Party, to the extent the Third Party
Claim seeks an order, injunction, or other equitable relief against the
Indemnified Party which, if successful, could materially adversely affect the
business, condition (financial or other), capitalization, assets, liabilities,
results of operations or prospects of the Indemnified Party.  The Indemnified Party shall make no
settlement, compromise, admission, or acknowledgment that would give rise to
liability on the part of the Indemnifying Party without the prior written
consent of the Indemnifying Party (which consent shall not be unreasonably
withheld, conditioned or delayed).


(c)           In
any case in which an Indemnified Party seeks indemnification hereunder and no
Third Party Claim is involved, the Indemnified Party shall deliver a Claim
Notice to the Indemnifying Party within a reasonably prompt period of time
after an officer of such Indemnified Party or its Affiliates has obtained knowledge
of the Loss giving rise to indemnification hereunder.  The failure or delay to so notify the
Indemnifying Party shall not relieve the Indemnifying Party of its obligations
under this Article 11 except to
the extent such failure results in insufficient time being available to permit
the Indemnifying Party to effectively mitigate the resulting Losses or
otherwise prejudices the Indemnifying Party.


Section 11.8          Limitations
on Indemnities.


(a)           Notwithstanding
the foregoing, (i) Seller shall not be obligated to indemnify any Purchaser
Indemnified Persons for Losses pursuant to Section
11.5(a), and Purchaser shall not be obligated to indemnify the
Seller Indemnified Persons for Losses pursuant to Section 



 46
 









 


11.6(a), in each
case, pursuant to this Article 11 unless
and until the amount of all Losses incurred by any Purchaser Indemnified
Persons, or by any Seller Indemnified Persons, as the case may be, exceeds, in
the aggregate, $21,500,000 (the “Deductible”), in which event the party or
parties seeking indemnity may recover all Losses incurred in excess of the
Deductible, and (i) Seller’s maximum liability for Losses pursuant to Section 11.5(a), and Purchaser’s maximum
liability for Losses pursuant to Section
11.6(a), in each case, shall be $215,000,000 (the “Maximum Indemnity
Amount”); provided, however, that, notwithstanding the foregoing, the
Deductible and the Maximum Indemnity Amount shall not apply to (and the
Indemnified Parties shall be entitled to be indemnified for all Losses relating
to) any claims based on the occurrence of common law actual fraud and (B) any
claims asserted under Section 11.5(a),
or Section 11.6(a) insofar as such
claims relate to any breach of Fundamental Representations or any certificate
to the extent based on any such Fundamental Representation.


(b)           Solely
for purposes of calculating the amount of Losses incurred arising out of or
relating to any breach or inaccuracy of a representation or warranty (and not
for determining whether a breach has occurred), the references to “Material
Adverse Effect” or other materiality qualifications (or correlative terms)
shall be disregarded.


(c)           The
liability of any party under Article 11
shall be in addition to, and not exclusive of, any other liability that such
party may have at Law or equity based on such party’s common law actual
fraud.  None of the provisions set forth
in this Agreement, including, but not limited to, the provisions set forth in Section 3.4(j) (relating to the Individual
Defect Deductible), Section 11.4(b) (relating
to limitations on the period during which a claim for indemnification may be
brought)  or Section 11.8(a) (relating to the
Deductible), shall be deemed a waiver by any party to this Agreement of any
right or remedy which such party may have at Law or equity based on any other
party’s common law actual fraud, nor shall any such provisions limit, or be
deemed to limit, (i) the amounts of recovery sought or awarded in any such
claim for common law actual fraud, (ii) the time period during which a
claim for common law actual fraud may be brought or (iii) the recourse which
any such party may seek against another party with respect to a claim for
common law actual fraud; provided, that with respect to such rights and
remedies at law or equity, the parties further acknowledge and agree that none
of the provisions of this Section 11.8(c),
nor any reference to this Section 11.8(c)
throughout this Agreement, shall be deemed a waiver of any defenses which may
be available in respect of actions or claims for common law actual fraud,
including but not limited to, defenses of statutes of limitations or
limitations of damages.


Section 11.9          Release.


EXCEPT WITH RESPECT TO SECTION 5.7 AND
POST-CLOSING REMEDIATION AGREED TO PURSUANT TO SECTION 4.3, PURCHASER HEREBY
RELEASES, REMISES AND FOREVER DISCHARGES THE SELLER INDEMNIFIED PERSONS FROM
ANY AND ALL CLAIMS, KNOWN OR UNKNOWN, WHETHER
NOW EXISTING OR ARISING IN THE FUTURE, CONTINGENT OR OTHERWISE, WHICH
PURCHASER MIGHT NOW OR SUBSEQUENTLY MAY HAVE AGAINST THE SELLER INDEMNIFIED PERSONS,
RELATING DIRECTLY OR INDIRECTLY TO THE CLAIMS ARISING OUT OF OR INCIDENT TO ENVIRONMENTAL LAWS, ENVIRONMENTAL LIABILITIES,
THE RELEASE OF MATERIALS INTO THE ENVIRONMENT OR PROTECTION OF HUMAN HEALTH,
SAFETY, NATURAL RESOURCES OR THE ENVIRONMENT, INCLUDING, WITHOUT
LIMITATION, RIGHTS TO CONTRIBUTION UNDER CERCLA, REGARDLESS OF FAULT.



 47
 









Section 11.10       Disclaimers.


(a)           EXCEPT AS AND TO THE EXTENT EXPRESSLY SET FORTH IN
THIS AGREEMENT, OR CONFIRMED IN THE CERTIFICATE OF SELLER TO BE DELIVERED
PURSUANT TO SECTION 9.2(c), IN THE CONVEYANCE, (I) SELLER MAKES NO
REPRESENTATIONS OR WARRANTIES, EXPRESS, STATUTORY OR IMPLIED, AND (II) SELLER
EXPRESSLY DISCLAIMS ALL LIABILITY AND RESPONSIBILITY FOR ANY REPRESENTATION,
WARRANTY, STATEMENT OR INFORMATION MADE OR COMMUNICATED (ORALLY OR IN WRITING)
TO PURCHASER OR ANY OF ITS AFFILIATES, EMPLOYEES, AGENTS, CONSULTANTS OR
REPRESENTATIVES (INCLUDING, WITHOUT LIMITATION, ANY OPINION, INFORMATION,
PROJECTION OR ADVICE THAT MAY HAVE BEEN PROVIDED TO PURCHASER BY ANY OFFICER,
DIRECTOR, EMPLOYEE, AGENT, CONSULTANT, REPRESENTATIVE OR ADVISOR OF SELLER OR
ANY OF ITS AFFILIATES).


(b)           EXCEPT AS EXPRESSLY REPRESENTED OTHERWISE IN ARTICLE 5
OF THIS AGREEMENT, OR CONFIRMED IN THE CERTIFICATE OF SELLER TO BE DELIVERED
PURSUANT TO SECTION 9.2(c), IN THE CONVEYANCE, AND WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, SELLER EXPRESSLY DISCLAIMS ANY REPRESENTATION OR
WARRANTY, EXPRESS, STATUTORY OR IMPLIED, AS TO (I) TITLE TO ANY OF THE ASSETS,
(II) THE CONTENTS, CHARACTER OR NATURE OF ANY DESCRIPTIVE MEMORANDUM, OR ANY
REPORT OF ANY PETROLEUM ENGINEERING CONSULTANT, OR ANY GEOLOGICAL OR SEISMIC
DATA OR INTERPRETATION, RELATING TO THE ASSETS, (III) THE QUANTITY, QUALITY
OR  RECOVERABILITY OF PETROLEUM
SUBSTANCES IN OR FROM THE ASSETS, (IV) ANY ESTIMATES OF THE VALUE OF THE ASSETS
OR FUTURE REVENUES GENERATED BY THE ASSETS, (V) THE PRODUCTION OF HYDROCARBONS
FROM THE ASSETS, (VI) THE MAINTENANCE, REPAIR, CONDITION, QUALITY, SUITABILITY,
DESIGN OR MARKETABILITY OF THE ASSETS, (VII) THE CONTENT, CHARACTER OR NATURE
OF ANY DESCRIPTIVE MEMORANDUM, REPORTS, BROCHURES, CHARTS OR STATEMENTS
PREPARED BY THIRD PARTIES, (VIII) ANY OTHER MATERIALS OR INFORMATION THAT MAY
HAVE BEEN MADE AVAILABLE OR COMMUNICATED TO PURCHASER OR ITS AFFILIATES, OR ITS
OR THEIR EMPLOYEES, AGENTS, CONSULTANTS, REPRESENTATIVES OR ADVISORS IN
CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY
DISCUSSION OR PRESENTATION RELATING THERETO, AND FURTHER DISCLAIMS ANY
REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY OR IMPLIED, OF MERCHANTABILITY,
FREEDOM FROM REDHIBITORY VICES OR DEFECTS (INCLUDING THOSE CONTEMPLATED IN
LOUISIANA CIVIL CODE ARTICLES 2475, AND 2520 THROUGH 2548), FITNESS FOR A
PARTICULAR PURPOSE OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS OF ANY
EQUIPMENT, IT BEING EXPRESSLY UNDERSTOOD AND AGREED BY THE PARTIES HERETO THAT
PURCHASER SHALL BE DEEMED TO BE OBTAINING THE ASSETS IN THEIR PRESENT STATUS,
CONDITION AND STATE OF REPAIR, “AS IS” AND “WHERE IS” WITH ALL FAULTS AND THAT
PURCHASER HAS MADE OR CAUSED TO BE  MADE
SUCH INSPECTIONS AS PURCHASER DEEMS APPROPRIATE, OR (IX) ANY IMPLIED OR EXPRESS
WARRANTY OF FREEDOM FROM PATENT OR TRADEMARK INFRINGEMENT.


(c)           EXCEPT AS REPRESENTED IN SECTION 5.7, SELLER HAS NOT
AND WILL NOT MAKE ANY REPRESENTATION OR WARRANTY REGARDING ANY MATTER OR
CIRCUMSTANCE RELATING TO ENVIRONMENTAL LAWS, ENVIRONMENTAL LIABILITIES, THE
RELEASE OF MATERIALS INTO THE ENVIRONMENT OR THE PROTECTION OF HUMAN HEALTH,
SAFETY, NATURAL RESOURCES OR THE ENVIRONMENT, OR ANY OTHER ENVIRONMENTAL
CONDITION OF THE ASSETS, AND 



 48
 









NOTHING IN THIS AGREEMENT OR OTHERWISE SHALL
BE CONSTRUED AS SUCH A REPRESENTATION OR WARRANTY, AND PURCHASER SHALL BE
DEEMED TO BE TAKING THE ASSETS “AS IS” AND “WHERE IS” FOR PURPOSES OF THEIR
ENVIRONMENTAL CONDITION.


Section 11.11       Waiver
of Trade Practices Acts.


(a)           It
is the intention of the parties that Purchaser’s rights and remedies with
respect to this transaction and with respect to all acts or practices of
Seller, past, present or future, in connection with this transaction shall be
governed by legal principles other than the Texas Deceptive Trade Practices—Consumer
Protection Act, Tex. Bus. & Com. Code Ann. § 17.41 et seq. (the “DTPA”) or the Louisiana unfair trade practices
and consumer protection law, La. R.S. 51:1402, et seq.
(the “UTPCPL”).  As such, Purchaser
hereby waives the applicability of the DTPA and the UTPCPL to this transaction
and any and all duties, rights or remedies that might be imposed by the DTPA
and/or the UTPCPL, whether such duties, rights and remedies are applied
directly by the DTPA or the UTPCPL itself or indirectly in connection with
other statutes; provided, however, Purchaser does
not waive § 17.555 of the DTPA. 
Purchaser acknowledges, represents and warrants that it is purchasing the
goods and/or services covered by this Agreement for commercial or business use;
that it has assets of $5,000,000.00 or more according to its most recent
financial statement prepared in accordance with GAAP; that it has knowledge and
experience in financial and business matters that enable it to evaluate the
merits and risks of a transaction such as this; and that it is not in a
significantly disparate bargaining position with Seller.


(b)           Purchaser
expressly recognizes that the price for
which Seller has agreed to perform its obligations under this Agreement has
been predicated upon the inapplicability of the DTPA and the UTPCPL and this
waiver of the DTPA and the UTPCPL. 
Purchaser further recognizes that Seller, in determining to
proceed with the entering into of this Agreement, has expressly relied on this
waiver and the inapplicability of the DTPA and the UTPCPL.


Section 11.12       Redhibition
Waiver.


Purchaser
waives all rights in redhibition pursuant to Louisiana Civil Code Articles 2475
and 2520 through 2548, and acknowledges that this express waiver shall be
considered a material and integral part of this transaction and the
consideration thereof.  Purchaser
acknowledges that this waiver has been brought to its attention and has been
explained in detail and that Purchaser has voluntarily and knowingly consented
to this waiver of warranty of fitness and warranty against redhibitory vices
and defects for the Assets.


Section 11.13       Recording.


As soon as practicable after Closing, Purchaser shall
record the Conveyance in the appropriate counties and/or parishes and provide
Seller with copies of all recorded or approved instruments.  The Conveyance is intended to convey all of
the Properties being conveyed pursuant to this Agreement.  Certain Properties or specific portions of
the Properties that are leased from, or require the approval to transfer by, a
Governmental Body are conveyed under the Conveyance and also are described and
covered by other separate assignments made by Seller to Purchaser on officially
approved forms, or forms acceptable to such entity, in sufficient multiple
originals to satisfy applicable statutory and regulatory requirements.  The interests conveyed by such separate
assignments are the same, and not in addition to, the interests conveyed in the
Conveyance attached as Exhibit B.  Further, such assignments shall be deemed to
contain the special warranty of title of Seller and all of the exceptions,
reservations,



 49















rights, titles, power and
privileges set forth herein and in the Conveyance as fully and only to the
extent as though they were set forth in each such separate assignment.


ARTICLE 12

MISCELLANEOUS


Section 12.1          Counterparts.


This Agreement may be executed and delivered
(including by facsimile transmission) in counterparts, each of which shall be
deemed an original instrument, but all such counterparts together shall
constitute but one agreement.


Section 12.2          Notice.


All notices which are required or may be given
pursuant to this Agreement shall be sufficient in all respects if given in
writing and delivered personally, by telecopy or by registered or certified
mail, postage prepaid, as follows:


	
  If to Seller:

  	
  Anadarko Petroleum Corporation

  
	
   

  	
  Anadarko E&P Company LP

  
	
   

  	
  Howell Petroleum Corporation

  
	
   

  	
  Kerr-McGee Oil & Gas Onshore LP

  
	
   

  	
  1201 Lake Robbins Drive

  
	
   

  	
  The Woodlands, TX 77380

  
	
   

  	
  Attention:

  	
  Transaction Manager, Business Development 

  
	
   

  	
  Telephone:

  	
  (832)636-3088

  
	
   

  	
  Telecopy:

  	
  (832)636-5889

  
	
   

  	
   

  
	
  With a copy to (which:

  	
  Anadarko Petroleum Corporation

  
	
  shall not constitute

  	
  1201 Lake Robbins Drive

  
	
  notice to Seller):

  	
  The Woodlands, TX 77380

  
	
   

  	
  Attention:

  	
  Associate General Counsel

  
	
   

  	
   

  	
  Oil, Gas and Minerals

  
	
   

  	
  Telephone:

  	
  (832)636-7530

  
	
   

  	
  Telecopy: 

  	
  (832)636-5889

  
	
   

  	
   

  
	
  If to Purchaser:

  	
  EXCO Resources, Inc.

  
	
   

  	
  12377 Merit Drive, Suite 1700

  
	
   

  	
  Dallas, Texas 75251

  
	
   

  	
  Attention:

  	
  William L. Boeing

  
	
   

  	
  Telephone:

  	
  (214) 368-2084

  
	
   

  	
  Telecopy: 

  	
  (214) 706-3409

  
	
  With a copy to (which

  	
   

  
	
  shall not constitute

  	
   

  
	
  notice to Purchaser):

  	
  Vinson & Elkins L.L.P.

  
	
   

  	
  2001 Ross Avenue, Suite 3700

  
	
   

  	
  Dallas, Texas 75201

  
	
   

  	
  Attention:

  	
  Jeffrey A. Chapman

  
				



 



 50
 









 


	
  

  	
   

  
	
   

  	
  Telephone:

  	
  (214) 220-7797

  
	
   

  	
  Telecopy:

  	
  (214) 999-7797

  
	
   

  	
  Attention:

  	
  P. Gregory Hidalgo

  
	
   

  	
  Telephone:

  	
  (214) 220-7959

  
	
   

  	
  Telecopy:

  	
  (214) 999-7959

  
	
   

  	
   

  



Either party may change its address for notice by
notice to the other in the manner set forth above.  All notices shall be deemed to have been duly
given at the time of receipt by the party to which such notice is addressed.


Section 12.3          Sales
or Use Tax Recording Fees and Similar Taxes and Fees.


Purchaser shall bear any sales, use, excise, real
property transfer, gross receipts, goods and services, registration, capital,
documentary, stamp or transfer Taxes, recording fees and similar Taxes and fees
(collectively “Transfer Taxes”) incurred and imposed upon, or with respect to,
the transactions contemplated by this Agreement.  Seller will determine, and Purchaser will
cooperate with Seller in determining the amount of any Transfer Taxes, if any,
that is due in connection with the transactions contemplated by this Agreement
and Purchaser agrees to pay any such Transfer Tax to Seller or to the
appropriate Governmental Body.  If any of
the transactions contemplated by this Agreement are exempt from any such
Transfer Taxes upon the filing of an appropriate certificate or other evidence
of exemption, Purchaser will timely furnish to Seller such certificate or
evidence.


Section 12.4          Expenses.


Except as otherwise expressly provided in Section 12.3 or elsewhere in this Agreement, (a) all
expenses incurred by Seller in connection with or related to the authorization,
preparation or execution of this Agreement, the Conveyance delivered hereunder
and the Exhibits and Schedules hereto and thereto, and all other matters
related to the Closing, including without limitation, all fees and expenses of
counsel, accountants and financial advisers employed by Seller, shall be borne
solely and entirely by Seller, and (b) all such expenses incurred by Purchaser
shall be borne solely and entirely by Purchaser.


Section 12.5          Change
of Name.


As promptly as practicable, but in any case within
ninety (90) days after the Closing Date, Purchaser shall eliminate the names “Anadarko
Petroleum Corporation”, “Anadarko” and any variants thereof and any names of
Seller’s Affiliates and any variants thereof from the Assets acquired pursuant
to this Agreement and, except with respect to such grace period for eliminating
existing usage, shall have no right to use any logos, trademarks or trade names
belonging to Seller or any of its Affiliates.


Section 12.6          Replacement of Bonds, Letters of
Credit and Guarantees.


The parties understand
that none of the bonds, letters of credit and guarantees, if any, posted by
Seller or any of its Affiliates with Governmental Bodies and relating to the
Assets may 



 51
 









be transferable to Purchaser.  Promptly following Closing, Purchaser shall
obtain, or cause to be obtained in the name of Purchaser, replacements for such
bonds, letters of credit and guarantees, to the extent such replacements are
necessary to permit the cancellation of the bonds, letters of credit and
guarantees posted by Seller or any of its Affiliates or to consummate the
transactions contemplated by this Agreement.


Section 12.7          Governing
Law and Venue.


THIS AGREEMENT AND THE LEGAL RELATIONS BETWEEN THE
PARTIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF TEXAS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS OTHERWISE
APPLICABLE TO SUCH DETERMINATIONS. 
JURISDICTION AND VENUE WITH RESPECT TO ANY DISPUTES ARISING HEREUNDER
SHALL BE PROPER ONLY IN HARRIS COUNTY, TEXAS.


Section 12.8          Captions.


The captions in this Agreement are for convenience
only and shall not be considered a part of or affect the construction or
interpretation of any provision of this Agreement.


Section 12.9          Waivers.


Any failure by any party or parties to comply with any
of its or their obligations, agreements or conditions herein contained may be
waived in writing, but not in any other manner, by the party or parties to whom
such compliance is owed. No waiver of, or consent to a change in, any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of,
or consent to a change in, other provisions hereof (whether or not similar),
nor shall such waiver constitute a continuing waiver unless otherwise expressly
provided.


Section 12.10       Assignment.


No party shall assign all or any part of this
Agreement, nor shall any party assign or delegate any of its rights or duties
hereunder, without the prior written consent of the other party.  Purchaser shall have the right to designate
an Affiliate to take title to the Assets located in Oklahoma and Kansas by
providing written notice thereof to Seller no later than ten (10) Business Days
prior to the Closing Date; provided, however, that no such designation shall
relieve Purchaser from any of its obligations hereunder.  This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.


Section 12.11       Entire
Agreement.


The Confidentiality Agreement, this Agreement and the
Exhibits and Schedules attached hereto, and the documents to be executed
hereunder constitute the entire agreement between the parties pertaining to the
subject matter hereof, and supersede all prior agreements, understandings,
negotiations and discussions, whether oral or written, of the parties
pertaining to the subject matter hereof.



 52
 









Section 12.12       Amendment.


(a)           This
Agreement may be amended or modified only by an agreement in writing executed
by the  parties hereto.


(b)           No
waiver of any right under this Agreement shall be binding unless executed in
writing by the party to be bound thereby.


Section 12.13       No
Third-Party Beneficiaries.


Nothing in this Agreement shall entitle any Person
other than Purchaser or Seller to any claims, remedy or right of any kind,
except as to those rights expressly provided to the Seller Indemnified Persons
and Purchaser Indemnified Persons (provided, however, any claim for indemnity
hereunder on behalf of an Seller Indemnified Person or an Purchaser Indemnified
Person must be made and administered by a party to this Agreement).


Section 12.14       References.


In this Agreement:


(a)           References
to any gender includes a reference to all other genders;


(b)           References
to the singular includes the plural, and vice versa;


(c)           Reference
to any Article or Section means an Article or Section of this Agreement;


(d)           Reference
to any Exhibit or Schedule means an Exhibit or Schedule to this Agreement, all
of which are incorporated into and made a part of this Agreement;


(e)           Unless
expressly provided to the contrary, “hereunder”, “hereof’, “herein” and words
of similar import are references to this Agreement as a whole and not any
particular Section or other provision of this Agreement;


(f)            “Include”
and “including” shall mean include or including without limiting the generality
of the description preceding such term; and


(g)           Capitalized
terms used herein shall have the meanings ascribed to them in this Agreement as
such terms are identified and/or defined in the Definitions section hereof.


Section 12.15       Construction.


Purchaser is a party capable of making such
investigation, inspection, review and evaluation of the Assets as a prudent
party would deem appropriate under the circumstances including with respect to
all matters relating to the Assets, their value, operation and suitability.
Each of Seller and Purchaser has had substantial input into the drafting and
preparation of this Agreement and has had the opportunity to exercise business
discretion in relation to the negotiation of the details of the transactions
contemplated hereby. This Agreement is the result of arm’s-length negotiations
from equal bargaining positions.  In the
event of a dispute over the meaning or application of this Agreement, it shall
be construed fairly and reasonably and neither more strongly for nor against
either party.



 53
 









Section 12.16       Conspicuousness.


The parties agree that provisions in this Agreement in
“bold” type satisfy any requirements of the “express negligence rule” and any
other requirements at law or in equity that provisions be conspicuously marked
or highlighted.


Section 12.17       Severability.


If any term or other provisions of this Agreement is
held invalid, illegal or incapable of being enforced under any rule of law, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in a materially adverse manner
with respect to either party; provided, however, that if any such term or
provision may be made enforceable by limitation thereof, then such term or
provision shall be deemed to be so limited and shall be enforceable to the
maximum extent permitted by applicable Law.


Section 12.18       Time
of Essence.


Time is of the essence in this Agreement.  If the date specified in this Agreement for
giving any notice or taking any action is not a Business Day (or if the period
during which any notice is required to be given or any action taken expires on
a date which is not a Business Day), then the date for giving such notice or
taking such action (and the expiration date of such period during which notice
is required to be given or action taken) shall be the next day which is a
Business Day.


Section 12.19       Affiliate
Liability.


Each of the following is herein referred to, for
purposes of this Section 12.19, as an “Purchaser
Affiliate”: (i) any direct or indirect holder of equity interests in Purchaser
(whether shareholders or otherwise), and (ii) any director, officer, manager,
employee, representative or agent of (a) Purchaser or (b) any Affiliate of
Purchaser.  Except to the extent that a
Purchaser Affiliate is an express signatory and party hereto, no Purchaser
Affiliate shall have any liability or obligation of any nature whatsoever in
connection with or under this Agreement, or the transactions contemplated
hereby, and Seller hereby waives and releases all claims of any such liability
and obligation.


Section 12.20       Schedules.


The disclosures in any Schedule must relate only to
the representations and warranties in the Section of this Agreement to which it
expressly relates and not to any other representation or warranty in this
Agreement, unless some other representation and warranty is specifically and
clearly referred to in such Schedule.


Section 12.21       Limitation
on Damages.


Notwithstanding any other provision contained
elsewhere in this Agreement to the contrary, the parties acknowledge that this
Agreement does not authorize one party to sue for or collect from the other
party its own punitive damages, or its own consequential or indirect damages in
connection with this Agreement and the transactions contemplated hereby and
each party expressly waives for itself and on behalf of its Affiliates, any and
all Claims it may 



 54
 









have against the other party for its own such damages
in connection with this Agreement and the transactions contemplated hereby.


[SIGNATURES BEGIN ON THE
FOLLOWING PAGE]



 55
 









IN WITNESS WHEREOF, this Agreement has been signed by
each of the parties hereto on the date first above written.


	
  SELLER:

  
	
   

  
	
  ANADARKO PETROLEUM CORPORATION

  
	
   

  
	
   

  
	
  By: 

  	
  /s/ ALBERT L. RICHEY

  	
   

  
	
  Albert L. Richey

  
	
  Vice President,
  Corporate Development

  
	
   

  
	
   

  
	
  ANADARKO E&P COMPANY LP

  
	
   

  
	
   

  
	
  By: 

  	
  /s/ ALBERT L. RICHEY

  	
   

  
	
  Albert L. Richey

  
	
  Vice President,
  Corporate Development

  
	
   

  
	
   

  
	
  HOWELL PETROLEUM CORPORATION

  
	
   

  
	
   

  
	
  By: 

  	
  /s/ ALBERT L. RICHEY

  	
   

  
	
  Albert L. Richey

  
	
  Vice President,
  Corporate Development

  
	
   

  
	
   

  
	
  KERR-MCGEE OIL & GAS ONSHORE LP

  
	
   

  
	
   

  
	
  By: 

  	
  /s/ ALBERT L. RICHEY

  	
   

  
	
  Albert L. Richey

  
	
  Vice President

  
	
   

  
	
   

  
	
   

  
	
  PURCHASER

  
	
   

  
	
  EXCO RESOURCES, INC.

  
	
   

  
	
   

  
	
  By: 

  	
  /s/ JOHN D. JACOBI

  	
   

  
	
  Name: John D. Jacobi

  
	
  Title: Vice President , Business Development

  



 



 56